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Table of Contents Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Town of Gilbert Arizona For its Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2019 Executive Director/CEO Table of Contents Comprehensive Annual Financial Report Year Ended June 30, 2020 Scott Anderson, Mayor Yung Koprowski, Vice Mayor Aimee Yentes, Council Member Jared Taylor, Council Member Kathy Tilque, Council Member Laurin Hendrix, Council Member Scott September, Council Member Patrick Banger, Manager Prepared by the Finance & Management Services Department Håkon Johanson, Finance & Management Services Director Table of Contents TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2020 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal Advisory Organizational Chart Organizational Reporting Chart FINANCIAL SECTION Independent Auditor's Report Page 1 8 9 11 Management's Discussion and Analysis (required supplementary information) 13 Basic Financial Statements: Government-wide Financial Statements Statement of Net Position Statement of Activities 27 28 Fund Financial Statements Balance Sheet - Governmental Funds Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual - Streets Special Revenue Fund Statement of Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Position - Fiduciary Funds Statement of Changes in Fiduciary Net Position - Fiduciary Funds Notes to the Financial Statements Required Supplementary Information Schedule of the Proportionate Share of the Net Pension Liability - ASRS Schedule of Changes in the Net Pension Liability and Related Ratios - PSPRS - Police Schedule of Changes in the Net Pension Liability and Related Ratios - PSPRS - Fire Schedule of Pension Contributions - ASRS Schedule of Pension Contributions - PSPRS Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios Notes to Pension Plan Schedules - Actuarially Determined Contribution Rates - PSPRS Combining and Individual Fund Statements and Schedules Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds Schedules of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual: Streets and Traffic Capital Projects Fund Parks Capital Projects Fund Municipal Facilities Capital Projects Fund Debt Service Fund 30 33 34 37 38 39 40 41 42 43 44 45 84 85 86 87 88 89 90 94 96 100 101 102 103 Table of Contents TOWN OF GILBERT, ARIZONA Comprehensive Annual Financial Report For the Year Ended June 30, 2020 TABLE OF CONTENTS Page Special Assessments Debt Service Fund Grants Fund Special Districts Fund Other Special Revenue Fund Other Capital Projects Fund Combining Statement of Net Position - Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Position - Internal Service Funds Combining Statement of Cash Flows - Internal Service Funds Agency Funds Combining Statement of Changes in Assets and Liabilities STATISTICAL SECTION Financial Trends Net Position by Component - Last Ten Fiscal Years Changes in Net Position - Last Ten Fiscal Years Program Revenues by Function - Last Ten Fiscal Years Fund Balances of Governmental Funds - Last Ten Fiscal Years Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years Revenue Capacity Sales Tax Collections by Category - Last Ten Fiscal Years Direct and Overlapping Sales Tax Rates - Last Ten Fiscal Years Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt - As of June 30, 2020 Legal Debt Margin Information - Last Ten Fiscal Years Pledged-Revenue Coverage - Last Ten Fiscal Years Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Fiscal Year and Nine Years Ago Operating Information Full-time Equivalent Employees by Function - Last Ten Fiscal Years Operating Indicators by Function - Last Ten Fiscal Years Capital Asset Statistics by Function - Last Ten Fiscal Years Other Information Property Value, Construction and Bank Deposits - Last Ten Fiscal Years System Development Fees - Fiscal Year 2020 Property Tax Levies and Collections - Last Ten Fiscal Years Principal Property Taxpayers - Fiscal Year 2020 104 105 106 107 108 110 111 112 114 117 118 120 121 122 123 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 Table of Contents Introductory Section ________________________________ Letter of Transmittal Advisory Organization Chart Organization Reporting Chart Table of Contents December 16, 2020 Honorable Mayor, Members of the Council, and Gilbert Citizens: I am pleased to submit to you the Comprehensive Annual Financial Report (CAFR) for the Town of Gilbert (Gilbert), for the fiscal year ended June 30, 2020. State law (Arizona Revised Statutes §9-481) requires that local governments publish a complete set of audited financial statements within six months of the close of each fiscal year. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any significant misstatements. Heinfeld, Meech & Company, a firm of licensed certified public accountants, has issued an unmodified opinion on Gilbert’s financial statements for the year ended June 30, 2020. The independent auditor’s report is located in the Financial Section of this report. This letter of transmittal is designed to complement Management’s Discussion and Analysis (MD&A) and should be read in conjunction with it. The MD&A can be found in the Financial Section of this report. GILBERT PROFILE Governmental Structure Gilbert is an Arizona Municipal Corporation, operating as a general law community as prescribed in the Arizona Revised Statutes. Gilbert was incorporated July 6, 1920, and operates under the CouncilManager form of government. The Mayor is a member of the Council and is elected by the voters for a four-year term. Six additional council members are elected at-large to staggered four-year terms. The Mayor is chairperson of the Council. The Town Manager (Manager) is appointed by the Council and serves as the chief executive officer to oversee and carry out operations. During fiscal year 2020, the Manager administered Gilbert's operations through a staff of 1,486 budgeted full-time equivalent positions. Gilbert provides or administers a full range of services including police and fire protection, development services (planning, code enforcement, and engineering), public works (water, wastewater, environmental services, and streets), and parks and recreation services among others. Transit and “dial-a-ride” services are provided through an intergovernmental agreement with the Regional Public Transportation Authority. Library services, incarceration and animal control are provided through intergovernmental agreements with Maricopa County. Town of Gilbert | A Community of Excellence 50 E Civic Center Drive, Gilbert, AZ 85296 | Phone 480-503-6871 | Fax: 480 497-4943 | www.GilbertAz.gov 1 Table of Contents Geography and Population Gilbert is located in the southeastern section of the greater Phoenix metropolitan area in Maricopa County, bounded on the north and east by the City of Mesa, on the west by the City of Chandler, on the southeast by the Town of Queen Creek, and on the south by the Gila River Indian Community. Gilbert has a planning area of 72.6 square miles. The most recent estimate of population as of July 1, 2019 is 259,386, which was derived from Maricopa Association of Governments population estimates. The following graph depicts the ten-year population trend for Gilbert. FACTORS AFFECTING FINANCIAL CONDITION Coronavirus Pandemic (COVID-19) On January 30, 2020 the World Health Organization (WHO) announced a global health emergency because of a new strain of coronavirus (the COVID-19 outbreak). In March of 2020, the WHO classified the COVID-19 outbreak as a pandemic. Gilbert initially responded to the pandemic by issuing hiring and spending freezes to remain conservative in its operations and spending until more information was available. Gilbert also transitioned much of its workforce where possible to a remote environment to both stop the spread of the virus and to adhere to state and federal guidelines issued by the Centers for Disease Control and Prevention (CDC) and state ordered mandates issued by the state governor’s office. Later in March of 2020, the federal government issued the Coronavirus Aid, Relief, and Economic Security Act (CARES) that provided relief funding to state and local governments. Gilbert received a total of $29.2 million, of which $23.0 million was recognized as revenue in fiscal year 2020; the remaining $6.2 million will be recognized in fiscal year 2021. Gilbert’s sales tax and state-shared revenues for fiscal year 2020 were higher than the previous fiscal year, putting Gilbert in a sound financial position. Gilbert does not expect that the effects of the pandemic will have a material adverse financial effect on items such as development activities, as well as collections from its business-type activities in the short or long-term. Gilbert used the $23.0 million to offset public safety personnel expenses incurred during the period March through June 2020. This left Gilbert with funds to provide aid and relief monies to support the local community in areas that felt adverse effects of the pandemic and related economic shutdown. 2 Table of Contents Growth and Construction There were 1,194 new residential permits and 208 commercial permits issued in fiscal year 2020, which represents a decrease from the prior fiscal year in residential permits of 341 and an increase in commercial permits of 53, respectively. The total value of all new construction in fiscal year 2020, including commercial, was $607.8 million, a decrease of $138.5 million in fiscal year 2020, which was largely due to COVID-19 that began in the latter half of fiscal year 2020, which, in some cases, slowed construction for several months due to social distancing requirements. System Development Fees (SDFs) are collected for capital needs related to growth in the community. The Council has adopted SDFs for police, fire, general government, road maintenance, traffic signals, parks and recreation, water resources, water, and wastewater. The fees are based on build-out system requirements to serve the projected population and land uses. During fiscal year 2020, a total of $33.6 million was collected in SDFs compared to $40.2 million in fiscal year 2019. Economic Development With nearly 260,000 residents, Gilbert is focused on sustaining the thriving community seen today well into the future. This aim is supported through a commitment to develop a prosperous community, strong economy, and exceptional built environment. Over the past few years, Gilbert has received numerous awards and recognitions, a few of which are included below.              AAA Bond rating from all three major rating agencies (S&P, Moody’s, and Fitch) Best City for Business in Arizona (Arizona Chamber of Commerce and Industry, 2019) Arizona's Fastest Growing City (WalletHub, 2018) Gilbert Tops List for Recovery in 100 Cities After Recession (Economic Innovation Group, 2018) #1 Safest City in Arizona, #6 in the Country (WalletHub, 2018) 3rd Most Livable City in the U.S. (SmartAsset, 2018) 3rd Best Place to Live in Arizona (Niche, 2018) 4th Best School District in America - Gilbert Public Schools (Alarms.org, 2018) 4th Best City to Buy a Family Home in the U.S. (SmartAsset, 2019) 5th Best Place to Find a Job in America (WalletHub, 2018) 7th Best Place to Raise a Family in the U.S. (WalletHub, 2019) 8th Best Midsize Real Estate Market in the U.S. (WalletHub, 2019) 20th Happiest Place to Live (WalletHub, 2018) Gilbert is a community committed to education; 44.1% of residents age 25 and older hold a bachelor’s degree or higher, compared with about 30.1% statewide and 33.1% nationally. Notable employers like Banner Health, Dignity Health, Banner MD Anderson Cancer Center, Go Daddy, the worldwide headquarters of Isagenix, Silent-Aire, Northrop Grumman, Lockheed Martin, and Deloitte benefit from this commitment to education and have helped keep Gilbert’s unemployment rate near 4.8%, as compared to approximately 6.8% for the state (both percentages prior to COVID-19). Knowledge assets that support the community include Park University, the University of Arizona, Arizona State University Polytechnic Campus, Chandler-Gilbert Community College, A.T. Still University, and numerous other colleges, universities, and technical schools within a 30-minute commute. Additionally, more than 30 charter/private schools and three A-rated school districts – Gilbert, Higley, and Chandler – serve the citizens of Gilbert. The Gilbert Office of Economic Development (OED) is one of approximately 65 Accredited Economic Development Organizations in the nation. Gilbert achieved this accreditation through the International Economic Development Council in 2013 and was the first Arizona economic development organization, and the second municipality in the nation, to do so. In fiscal year 2020, the business development lines of services saw strong performance, and Gilbert facilitated the attraction and expansion of a diverse mix of projects and property types. The 15 business development successes in fiscal year 2019 represent 800+ new or expanded jobs, $75.0 million in capital investment, and nearly 500,000 new or expanded square footage. These projects demonstrate the community’s continued commitment to creating the place where the market wants to invest. 3 Table of Contents Investment in the Heritage District also continued with a focus on attracting businesses and developing critical infrastructure to support future growth. During fiscal year 2020, the Heritage District welcomed new restaurants, retailers, and higher education institutions. In addition to these new businesses, in June 2020, Gilbert opened The Collab, a 40,500 square foot, four story, mixed use building bringing dining, shopping and much-needed office space to one of the fastest-growing entertainment hotspots in Arizona. The Collab is primed to become some of the most sought-after real estate in the area for businesses with best-in-class finishes, ample parking with an adjacent 364-space parking garage, floor-to-ceiling glass, views of the Gilbert water tower and expansive balcony on the top floor. On the tourism front, Discover Gilbert continued its substantial efforts to expose new groups to Gilbert including partnering with the Arizona Office of Tourism, conducting familiarization tours, and hosting the Arizona Food and Farm Forum in partnership with the Local First Arizona Foundation. Marketing campaigns across a variety of media channels in the targeted markets generated over 10 million impressions, and Gilbert hotels saw room demand increase 18.9% from fiscal year 2019 before finishing the fiscal year down 4.7% following executive orders that prompted quarantines and travel restrictions due to COVID-19. Gilbert’s connectivity to major markets is provided through a comprehensive transportation network which includes the SanTan Loop 202 and US-60 Superstition Freeways, Sky Harbor International Airport, and Phoenix-Mesa Gateway Airport. This network provides access to Gilbert-based businesses while connecting the community to local, national and international markets. Located just over 10 miles west of Gilbert, Phoenix Sky Harbor Airport is served by 17 airlines. Sky Harbor is one of the busiest airports in the nation for passenger traffic with over 100,000 passengers daily. Phoenix-Mesa Gateway Airport is located on Gilbert’s eastern border and handles over one million passengers yearly with flights to over 35 destinations throughout the United States. The airport also provides air cargo services and is located within a Foreign Trade Zone. Transaction Privilege (Sales) Tax Trend Sales tax revenues represented 44.5% of General Fund revenues for fiscal year 2020, totaling approximately $107.6 million. Local sales taxes are collected by the Arizona Department of Revenue and remitted to Gilbert weekly. The following graph depicts sales tax receipts by source for the past five years. Property Taxes State law requires municipalities to adopt a property tax levy based on the amount of scheduled and projected debt service for the year plus a reasonable amount for delinquencies and certain costs. For fiscal year 2020, Gilbert’s property tax rate was $0.99 per $100 of limited property valuation and was used exclusively for the payment of voter approved general obligation bond debt. Gilbert does not levy a primary property tax for general operating purposes. 4 Table of Contents Limited Property Value The limited property value of real property within the Gilbert annexed area is a vital economic forecast variable, as the State Constitution contains regulatory restrictions on the amount of debt a community may have outstanding based on limited property valuation. Taking the market value of a property and applying the statutory assessment rate derives the limited property value. Residential properties are assessed at 10%, vacant land is assessed at 16%, and commercial properties are assessed at 18%. This illustrates how crucial the additions of commercial properties are to the tax base. The limited property valuation increased by 7.6% in fiscal year 2020 from $2.256 billion to $2.428 billion. The following graph depicts the changes in the limited property valuation in Gilbert for the past ten years: State-Shared Revenues State-shared revenues totaled $68.5 million for the General Fund and $16.4 million for the Streets Special Revenue Fund in fiscal year 2020, representing approximately 28.3% of total General Fund revenues and 96.8% of total Streets Special Revenue Fund revenues. State-shared revenues include allocations of state sales tax, income tax, gas tax, motor vehicle in-lieu tax, and lottery funds. These revenues are shared based upon relative population in the State as determined by the most recent population estimates of the United States Census Bureau. Budget and Financial Policies Gilbert’s financial policies establish the framework for overall fiscal planning and management. The policies set forth guidelines for both current activities and long-range planning. The purposes of the financial policies are: Balanced Budget – Gilbert is required by Arizona Revised Statutes to adopt a balanced budget each fiscal year. A balanced budget is one in which the sum of estimated revenues and appropriated fund balances is equal to appropriations. Fiscal Conservatism – To ensure that Gilbert is always in solid financial condition, defined as: Maximum efficiency – best possible service at the lowest possible cost Cash solvency – the ability to pay bills Budgetary solvency – the ability to balance the budget Long-term solvency – the ability to pay future costs Service level solvency – the ability to provide needed and desired services 5 Table of Contents Flexibility – To ensure Gilbert is in a position to respond to changes in the economy or new service challenges without an undue amount of financial stress. Transparency and Communication – To utilize best practices in communicating financial information to facilitate sound decision-making, to promote openness and transparency, and to inspire public confidence and trust. Adherence to the Highest Accounting and Management Practices – As set by the Governmental Accounting Standards Board and the Government Finance Officers Association standards for financial reporting and budgeting. A five-year financial plan is developed for each operating fund, and current year decisions are made with a forecasted future impact. Other financial policies that guide the budget include: maintaining a minimum general fund balance sufficient to cover 90 days of operating expenditures and the annual debt service payments; one-time revenues are not applied toward ongoing expenditures; and an economic development reserve. Gilbert’s Council adopted a comprehensive listing of policies of responsible financial management in November of 2011, with the latest revision in June of 2020. These policies are reviewed annually to ensure their continued relevance and adherence. Long-Term Financial Planning In addition to Gilbert’s General Plan and Capital Improvement Plan, Gilbert is developing infrastructure inventories (including repair and replacement plans) and functional area master plans. Gilbert staff and Council also align both short-term goals and resources toward the long-term realization of Gilbert’s established strategic focus areas: Strong Economy, Prosperous Community and Exceptional Built Environment. In fiscal year 2019, Gilbert proudly unveiled its new mission and “City of the Future” concept to anticipate change, create solutions and help people. Gilbert has implemented Franklin Covey’s The 4 Disciplines of Execution, providing an exceptional tool for advancing these goals while managing the challenges of the daily whirlwind, and Lean Six Sigma (Lean) process improvement events to optimize processes throughout the organization to further enhance Gilbert’s long-term financial resiliency. Gilbert continues to update its Long-Term Financial Plan, which includes an interactive Excel model. The model looks at revenue and spending trends to predict what the financial sustainability of Gilbert would look like if those trends were to continue. The main dashboard contains live “what if” variables that can be easily changed to help decision-makers see the financial impact that individual changes make to the overall budget health into the future. AWARDS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting (Certificate of Achievement) to the Town of Gilbert for its CAFR for the fiscal year ended June 30, 2019. This was the 29th consecutive year that Gilbert has received this prestigious award. In order to be awarded a Certificate of Achievement, we must publish an easily readable and efficiently organized CAFR that satisfies both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Gilbert also received the GFOA’s Distinguished Budget Presentation Award for our annual budget document. In order to qualify for this award, our budget document was judged to be proficient as a policy document, a financial plan, an operations guide, and a communications device. Gilbert has received this award for 21 consecutive years. In addition, the International City/County Management Association recognized Gilbert with a Certificate of Excellence in Performance Management for its data-driven management and reporting efforts. This marks the fifth consecutive year that Gilbert has received this Certificate. 6 Table of Contents ACKNOWLEDGMENTS The completion of this report is the result of the efficient and dedicated services of the entire staff of the Accounting Division. I would like to give special recognition to Tanya Wright, Accounting Manager; Anthony St. George, Accounting Supervisor; and Nicholas Baldelli, Accounting Supervisor who were primarily responsible for preparing this document. In addition, I would like to thank staff from all Town departments for their contributions and assistance. Finally, I wish to acknowledge the continued support of the Council and the Manager in providing the leadership necessary for sound financial management. Respectfully submitted, Håkon Johanson Finance & Management Services Director 7 Table of Contents ADVISORY ORGANIZATIONAL CHART CITIZENS OF GILBERT MAYOR AND COUNCIL Town Clerk Municipal Court Town Manager Town Attorney ADVISORY BOARDS AND COMMISSIONS Utilities Board Industrial Development Authority Arts Committee Health Insurance Trust Parks and Recreation Board Mayor's Youth Advisory Committee Judicial Review Committee Fire Public Safety Retirement Pension Board Police Public Safety Retirement Pension Board Redevelopment Commission Planning Commission Water Resources Municipal Property Corporation Public Facilities Municipal Property Corporation Veterans and Military Advisory Board Worker's Compensation Board 8 Table of Contents ORGANIZATIONAL REPORT CHARTT Town Clerk Municipal Court Town Manager Intergovernmental Relations Town Attorney Digital Government Deputy Town Manager Deputy Town Manager Deputy Town Manager Economic Development Police Finance and Management Services Parks and Recreation Fire and Rescue Information Technology Development Services Public Works Management and Budget Water Resources, CDBG, Emergency Management Human Resources 9 10 Table of Contents Financial Section ________________________________ Independent Auditor’s Report Management’s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Required Supplementary Information Combining and Individual Fund Statements and Schedules Table of Contents INDEPENDENT AUDITOR’S REPORT Honorable Mayor and Members of the Town Council Town of Gilbert, Arizona Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information of Town of Gilbert, Arizona (Town), as of and for the year ended June 30, 2020, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, each major fund, and the aggregate discretely presented component unit and remaining fund information of the Town of Gilbert, Arizona, as of June 30. 2020, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the General Fund and Streets Special Revenue Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. 11 Table of Contents Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, net pension liability information, and other postemployment benefit plan information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The accompanying supplementary information such as the Introductory Section, Combining and Individual Fund Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the financial statements. The Combining and Individual Fund Statements and Schedules, as listed in the table of contents, are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 16, 2020, on our consideration of Town of Gilbert, Arizona’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Town of Gilbert’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Town of Gilbert, Arizona’s internal control over financial reporting and compliance. Heinfeld, Meech & Co., P.C. Tucson, Arizona December 16, 2020 12 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the Town of Gilbert (Gilbert), we offer this narrative overview and analysis of Gilbert’s financial activities for the fiscal year ended June 30, 2020. We encourage readers to consider the information presented here in conjunction with information provided in the transmittal letter. Financial Highlights        Gilbert’s assets and deferred outflows of resources exceeded its liabilities and deferred inflows of resources at the end of the fiscal year by $1.9 billion, which is an increase over prior year of $90.2 million. Included in this amount, defined as net position, is $540.8 million of unrestricted net position, of which $188.5 million is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek, and $352.3 million which may be used to fund ongoing operations in future years. Net position includes a $804.9 million net investment in capital assets in Governmental Activities such as streets, parks, and municipal buildings and a $468.4 million net investment in Business-type Activities in water, wastewater and environmental services infrastructure and equipment. Amounts increased in the Governmental Activities by $62.3 million primarily due to the construction of various capital projects including Gilbert Regional Park Phase II ($24.8 million), Lindsay and Loop 202 Interchange including surrounding streets projects necessary for the interchange ($20.2 million), and regularly scheduled debt payments made during the fiscal year. Amounts in the Business-type Activities remained relatively the same. The combined fund balance for all governmental funds is $302.9 million, of which $185.5 million is unrestricted which is an increase of $71.5 million from prior year primarily due to AZ CARES funding allocation of $29.2 million to assist with the financial impacts of COVID-19 and unspent bond proceeds of $17.8 million from the 2020 general obligation bond issuance. In fiscal year 2020, $23.0 million of the AZ CARES funding was recorded as revenue, and the remaining $6.2 million will be recognized as revenue in fiscal year 2021. The General Fund unrestricted fund balance is $201.9 million, of which $68.0 million has been assigned for capital replacement, capital improvements, and road maintenance. The General Fund unassigned balance of $133.9 million is approximately 76.4% of the total fund expenditures. Gilbert’s total bonded debt outstanding at the end of the fiscal year was $381.9 million, as compared to $364.6 million at the end of fiscal year 2019, which is an increase of $17.3 million due to issuing $76.8 million in general obligation bonds and refunding bonds in fiscal year 2020 offset by regularly scheduled debt payments made throughout the fiscal year. Gilbert’s total net pension liability at the end of the fiscal year was $144.7 million, as compared to $133.9 million at the end of fiscal year 2019. Gilbert made contributions in excess of the annual required contribution to the Public Safety Personnel Retirement System (PSPRS) of $16.5 million during the fiscal year. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to Gilbert’s basic financial statements, which are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the finances of Gilbert as a whole, in a manner similar to a private-sector business. The statement of net position presents information on all of Gilbert’s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether Gilbert’s financial position is improving or declining. 13 Table of Contents The statement of activities presents the changes in net position from the previous year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of Gilbert that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover a majority or all of their costs through user fees and charges (business-type activities). The governmental activities of Gilbert include general government, public safety, highways and streets, parks and recreation, and transportation. The business-type activities include water, wastewater, and environmental services. The government-wide financial statements also include the Industrial Development Authority (IDA) as a component unit of Gilbert. The Authority provides financing for eligible private sector entities to acquire and construct facilities deemed to be in the public interest. The financial information for the Authority is presented separately in the statements. The government-wide financial statements can be found on pages 27-29 of this report. Fund financial statements A fund is a grouping of related accounts used to maintain control over resources segregated for specific activities or objectives. Gilbert, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of Gilbert’s funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds Governmental funds account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike the government-wide financial statements, however, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at fiscal year-end. This information may be useful in evaluating a government’s near-term financing ability. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of Gilbert’s near-term financing decisions. To facilitate this comparison, reconciliations are provided with the fund financial statements. The basic governmental fund financial statements can be found on pages 30-39. Proprietary Funds Gilbert maintains two different types of proprietary funds. Enterprise funds report the same functions presented as business-type activities in the government-wide financial statements, which include water, wastewater, and environmental services. Internal service funds accumulate and allocate costs internally among the various functions. Gilbert uses internal service funds to account for maintenance of its fleet of vehicles, and employee health and dental self-insurance. The assets and liabilities of the internal service funds are included in the governmental activities column of the government-wide statement of net position. Costs of internal service funds are allocated to the various user functions on the governmentwide statement of activities. Enterprise funds provide the same information as the government-wide financial statements, only with more detail. Internal service funds are combined into a single column on the proprietary funds statements. Additional detail for the internal service funds can be found on pages 110-112. The proprietary fund statements can be found on pages 40-42. 14 Table of Contents Fiduciary Funds Fiduciary funds account for resources held for the benefit of parties outside the government. These funds are not included in the government-wide statements as these funds are not available to support Gilbert’s operations. The fiduciary fund statements can be found on pages 43-44. Notes to the financial statements The notes to the financial statements provide additional information that is essential to obtain a full understanding of the data provided in the government-wide and fund financial statements and should be read with the financial statements. The notes to the financial statements can be found on pages 45-82. Government-wide Financial Analysis Net position serves as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Position as of June 30, 2020 and 2019. Town of Gilbert Condensed Statement of Net Position Current and other assets Capital assets Total assets Governmental Activities 2020 2019 $ 373,833,644 $ 322,302,383 1,042,290,182 1,006,398,307 1,416,123,826 1,328,700,690 Business-type Activities 2020 2019 $ 478,930,144 $ 471,146,909 611,566,663 599,455,880 1,090,496,807 1,070,602,789 Total 2020 2019 $ 852,763,788 $ 793,449,292 1,653,856,845 1,605,854,187 2,506,620,633 2,399,303,479 Deferred outflows of resources 60,115,067 51,579,122 5,515,756 5,904,975 65,630,823 57,484,097 Long-term liabilities Other liabilities Total liabilities 415,369,055 40,421,302 455,790,357 378,325,483 41,952,955 420,278,438 175,198,877 17,706,416 192,905,293 181,828,153 18,375,319 200,203,472 590,567,932 58,127,718 648,695,650 560,153,636 60,328,274 620,481,910 9,951,074 11,783,291 1,640,558 2,839,109 11,591,632 14,622,400 Deferred inflows of resources Net position: Net investment in capital assets 804,916,527 792,863,888 Restricted 72,942,666 87,449,935 Unrestricted 132,638,269 67,904,260 Total net position $ 1,010,497,462 $ 948,218,083 $ 468,440,304 462,857,212 24,872,533 30,971,975 408,153,875 379,635,996 901,466,712 $ 873,465,183 1,273,356,831 1,255,721,100 97,815,199 118,421,910 540,792,144 447,540,256 $ 1,911,964,174 $ 1,821,683,266 Net position consists of three components. The largest portion of Gilbert’s net position (66.6%) is its investment in capital assets (land, buildings, equipment, infrastructure, etc.), less depreciation and any related debt used to acquire those assets that is still outstanding. Gilbert uses these capital assets to provide services to citizens; consequently, these assets are not available for appropriation. Although Gilbert’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt are provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of Gilbert’s net position (5.1%) represents resources that are subject to external restrictions on how they may be used. The remaining portion of net position (28.3%) includes $188.5 million which is invested in joint ventures with the Cities of Mesa and Chandler and the Town of Queen Creek and $352.3 million which may be used to meet the government’s ongoing obligations to citizens, customers, and creditors. 15 Table of Contents Governmental Activities Governmental activities in fiscal year 2020 increased Gilbert’s net position by $62.3 million. Taxes and program revenues (charges for services and grants and contributions that are clearly identifiable to operating functions) were Gilbert’s most significant revenue sources comprising 96.8% of total revenues for governmental activities. Taxes (local and state-shared) were $195.6 million, an increase of $14 million from the prior year. Program revenues were $108.6 million, an increase of $24.6 million from the prior year, which was mostly due to an increase in operating grants and contributions specifically related to police, fire, and highways and streets. It should be noted that $5.7 million of the total program revenues represent capital contributions from developers of street related infrastructure and, therefore, were not cash revenues available to cover operating expenses. The other component of the change in net position is expenses. The largest expense functions were public safety, which represented 42.6%, and highways and streets, which represented 24.4% of total governmental activities expenses. Total expenses increased $15.9 million (6.7%) over the prior fiscal year. The following table details the changes in net position for governmental and business-type activities. Changes in Net Position Governmental Activities 2020 Business-type Activities 2019 2020 Total 2019 2020 2019 $ 112,649,095 Revenues Program revenues: Charges for services 17,821,966 $ 100,472,155 94,827,129 $ 115,758,765 Operating grants and contributions $ 15,286,610 53,661,220 $ 30,012,491 1,697,653 $ 1,719,627 55,358,873 31,732,118 Capital grants and contributions 39,674,803 36,202,639 18,318,923 27,031,705 57,993,726 63,234,344 General revenues: Sales taxes 107,533,991 98,647,781 - - 107,533,991 98,647,781 Property taxes 26,569,667 25,219,672 - - 26,569,667 25,219,672 Unrestricted state-shared revenue 57,801,651 53,776,642 - - 57,801,651 53,776,642 Other taxes 3,758,649 3,977,715 - - 3,758,649 3,977,715 Grants and contributions not restricted to specific programs 2,762,422 3,036,275 - - 2,762,422 3,036,275 Unrestricted investment earnings 10,467,209 10,152,812 9,820,041 11,493,742 20,287,250 21,646,554 Gain (loss) on sale of capital assets (3,973,409) 1,153,307 147,543 183,078 (3,825,866) 1,336,385 674,421 1,466,350 680,116 365,821 1,354,537 1,832,171 314,217,234 281,467,650 131,136,431 135,621,102 445,353,665 417,088,752 24,948,029 Other Total revenues Expenses Management and policy 23,430,414 24,948,029 - - 23,430,414 Finance and management services 2,590,722 1,883,402 - - 2,590,722 1,883,402 Court 3,946,778 3,897,817 - - 3,946,778 3,897,817 Development services 10,897,963 9,448,543 - - 10,897,963 9,448,543 Police 65,972,487 55,328,243 - - 65,972,487 55,328,243 Fire 41,373,244 35,263,222 - - 41,373,244 35,263,222 Highw ays and streets 61,413,551 54,632,234 - - 61,413,551 54,632,234 Parks and recreation 35,840,421 26,844,019 35,840,421 - - 26,844,019 Transportation 655,050 886,089 - - 655,050 886,089 Non departmental 5,075,953 3,914,638 - - 5,075,953 3,914,638 9,641,221 9,889,904 - - 9,641,221 9,889,904 - - 49,373,198 47,167,081 49,373,198 47,167,081 Interest and fiscal charges on long-term debt Water Wastew ater - - 30,930,246 27,843,727 30,930,246 27,843,727 Environmental services - - 22,927,911 21,688,906 22,927,911 21,688,906 251,841,402 235,932,542 103,231,355 96,699,714 355,072,757 332,632,256 62,375,832 45,535,108 27,905,076 38,921,388 90,280,908 84,456,496 (96,453) (241,732) 96,453 241,732 - - Change in net position 62,279,379 45,293,376 28,001,529 39,163,120 90,280,908 84,456,496 Net position, beginning year 948,218,083 902,924,707 873,465,183 834,302,063 1,821,683,266 1,737,226,770 $ 1,010,497,462 $ 948,218,083 $ 901,466,712 $ 873,465,183 $ 1,911,964,174 $ 1,821,683,266 Total expenses Increase in net position before transfers Transfers Net position, end of year 16 Table of Contents Business-type Activities Gilbert’s net position for business-type activities increased by $28.0 million mainly due to development related growth, including $14.1 million in system development fee collections and $4.2 million in water, wastewater, and environmental services infrastructure contributed by developers and investment earnings of $9.8 million. The revenues for business-type activities decreased by $4.5 million (3.3%) from the prior year mainly due to decreases in contributions by developers. Expenses increased $6.5 million (6.8%) from the prior year primarily due to an increase in the net pension liability and increased depreciation expense. Financial Analysis of Gilbert’s Funds As noted earlier, Gilbert maintains fund accounting to demonstrate compliance with budgetary and legal requirements. The following is a brief discussion of financial highlights from the fund financial statements. Governmental Funds The focus of the governmental funds is to provide information on near-term inflows, outflows, and balances of resources available for spending. Such information is useful in assessing Gilbert’s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Gilbert operated and separately reported the following major governmental funds:        General Streets Special Revenue Streets and Traffic Capital Projects Parks Capital Projects Municipal Facilities Capital Projects Debt Service Special Assessments Debt Service All nonmajor funds are combined for reporting purposes captioned “Other Governmental Funds”. As of the end of fiscal year 2020, the governmental funds reported ending unrestricted fund balances totaling $185.5 million, an increase of $71.5 million in comparison with the prior fiscal year. See explanations of variances below. General Fund The General Fund is the primary operating fund. At the end of fiscal year 2020, the fund balance of the General Fund was $217.7 million, an increase of $63.3 million from the prior year. This increase is mainly due to the Arizona Coronavirus Aid, Relief, and Economic Security (AZ CARES) grant recognized of $23.0 million, land sales resulting in proceeds of $19.3 million, and increased sales tax of $8.9 million over the prior fiscal year. An additional $6.2 million in revenue from this grant will be recorded in fiscal year 2021. The intended use of the AZ CARES funding is to disperse a majority of those funds back into the community through business grants, loans, and technical assistance and increased non-profit assistance in the next fiscal year. Another portion of the funds will go towards improving the police dispatch center in a future fiscal year. The unrestricted portion of the fund balance was $201.9 million, of which $17.5 million has been assigned for capital replacement, $12.9 million for roads and maintenance, $37.5 million for future capital projects, and $3.9 million for encumbrances outstanding as of fiscal year-end. As a measure of the General Fund’s liquidity, it is useful to compare its available fund balance to total fund expenditures. The General Fund’s unassigned fund balance represents 76.4% of total General Fund expenditures for the current year. The prior year percentage was 57.5%; this increase reflects an increase in available fund balance. 17 Table of Contents Key elements of General Fund sources and uses are as follows:  Overall, revenues exceeded expenditures in the General Fund by $66.2 million. Net other financing sources and uses were ($3.0) million, resulting in an increase in fund balance of $63.2 million. The transfers out of $23.6 million were to finance capital projects ($15.5 million), pay scheduled debt payments ($7.6 million), and one-time subsidy transfers ($540 thousand). The proceeds from the sale of capital assets of $19.3 million represented several land sales, the largest of which was $18.5 million for 58 acres of land.  Total revenues of $241.4 million represented an increase of $41.6 million over the prior year due to the AZ CARES funding, increased contributions by developers, and increased sales tax, as described previously and below.  Total expenditures of $175.2 million represented an increase of $19.2 million over prior year mainly due to Police and Highways and streets, as explained below.  Local sales tax and intergovernmental revenues are the largest revenue sources for the General Fund, accounting for 83.6% of the total revenues, which is consistent with the prior year.  Local sales tax, which accounts for 44.5% of total General Fund revenues, increased $8.9 million (9.0%) from the prior fiscal year due to increased retail sales from new and existing businesses.  Police expenditures increased $11.4 million (20.0%) mainly due to increased contributions made to the PSPRS above the annually required contribution of $13.7 million in fiscal year.  Highways and streets expenditures increased $5.3 million (more than 100%) due to the current year change in accounting for asphalt patching. 18 Table of Contents Streets Special Revenue Fund The Streets Fund contains state-shared highway user revenues funds (HURF) that are required by state statute to be used for highways and streets related purposes. Total revenues in the Streets Fund remained stable from prior year, with only a $40 thousand (0.2%) decrease from the prior year. Total expenditures increased by $1.6 million (12.0%) mainly due to a streetlight rehabilitation project. In total, revenues exceeded expenditures by $2.0 million; however, the transfer out of $920 thousand for internal service charges resulted in a $1.0 million increase in fund balance. Other Major Governmental Funds Streets and Traffic Capital Projects. The Streets and Traffic Capital Projects Fund consists of system development fee revenue and the expenditure of those funds to purchase or construct capital assets. The fund balance decreased by $22.2 million during the year. This was mainly due to the use of fund balance to purchase or construct capital assets related to streets and traffic capital projects totaling $37.1 million. The larger projects with capital expenditures during the year were related to the Lindsay and 202 interchange totaling $15.2 million, which is expected to be completed at the end of fiscal year 2021. Capital outlay was offset by intergovernmental revenues of $4.5 million mainly for reimbursements from ADOT and system development fee collections of $3.5 million. Parks Capital Projects. The Parks Capital Projects Fund accounts for system development fee revenue and the expenditure of those funds for parks infrastructure. The fund balance decreased by $4.3 million during the year, which was primarily due to capital outlay of $35.2 million. The largest project with capital expenditures during the year was Gilbert Regional Park of $23.4 million for work on Phase 1B which includes a ten-acre event lawn and amphitheater, seven-acre lake and community fishing program, group ramada, volleyball courts, and a two-mile walking path. These expenditures were offset by proceeds from the sale of land of $19.1 million that was originally intended for park purposes. The remaining fund balance of $12.4 million will be used to fund future parks needs related to growth in Gilbert. Municipal Facilities Capital Projects. The Municipal Facilities Capital Projects Fund consists of system development fee revenue and Public Facilities Municipal Property bond proceeds and the expenditure of those funds to purchase or construct municipal capital assets. The fund balance increased by $16.7 million during the year. The increase was due to the issuance of general obligation bonds and premium totaling of $65.9 million to pay for the costs of the Public Safety Training Facility and system development fees collected for police, fire, and general government of $7.3 million. Bond proceeds were offset by capital outlay of $51.4 million, which was largely for construction costs of the Public Safety Training Facility. Debt Service. The fund balance increased by $35 thousand during the year. This was due to the issuance of general obligation refunding bonds of $15.0 million with a net premium of $1.4 million to advance refund $16.0 million of outstanding Series 2008 General Obligation Bonds. Property taxes, transfers from other funds, and refunding proceeds totaled $56.8 million, while debt service totaled $58.5 million. The premium from refunding of $1.4 million, and interest income of $300 thousand resulted in a minimal increase in fund balance. See Note 8 for additional information. Special Assessments Debt Service. The fund balance of $203 thousand is restricted to pay future debt service requirements on special assessment bonds. Nonmajor Governmental Funds All nonmajor governmental funds are combined into one column on the governmental fund statements. The combined fund balance of these funds increased $696 thousand to a balance at year-end of $2.2 million. Nonmajor funds represent less than 1% of the total governmental fund balance. 19 Table of Contents Proprietary Funds Gilbert’s proprietary funds statements are prepared on the same basis (accrual) as the government-wide financial statements. Gilbert operates, and separately reports, the following proprietary funds:    Water Wastewater Environmental Services Water Fund The Water Fund is responsible for producing and distributing potable water that exceeds all county, state and federal drinking water standards. The water system is also sized and pressurized to provide adequate fire suppression to the entire planning area and operates two surface water treatment facilities capable of producing 69 million gallons per day (mgd), and 17 ground water wells capable of producing 43.5 mgd. The SanTan Vista Water Treatment Plant is jointly owned with the City of Chandler, with Gilbert acting as the lead agent. Net position increased by $19.1 million to $478.3 million due primarily to capital contributions of $13.7 million, including $10.6 million in system development fees and $3.1 million in distribution lines contributed by developers. Operating income was $2.7 million, which is slightly higher than prior year of $1.9 million. Wastewater Fund The Wastewater Fund provides wastewater collection and treatment services to residents and businesses in Gilbert through the operation of two wastewater treatment facilities. The services also include the storage and distribution of effluent (treated wastewater). Part of the Phase III Expansion for the Greenfield Water Reclamation Plant (GWRP), a joint venture with the City of Mesa acting as lead agent, is expected to be completed in fiscal year 2021. The expansion includes improvements and upgrades to increase the plant’s capacity from 16 mgd to 30 mgd, as well as maintenance and improvements to the existing infrastructure of the plant. Net position increased $8.1 million to $371.0 million due primarily to capital contributions of $4.3 million, including $3.5 million in system development fees and $865 thousand in collection lines contributed by developers. Operating income was $172 thousand, which is a decrease of $1.9 million from prior year. The decrease in capital contributions compared to the prior year by $3.3 million, offset by an increase in charges for services revenue of $1.1 million resulting from receiving a full year of the rate increases that went into effect November 2018. Environmental Services Fund Gilbert operates the Environmental Services Fund to provide residential and commercial refuse collection, residential recycling services, street cleaning, storm water infrastructure, and environmental compliance. Residential services are provided exclusively by Gilbert, while the commercial service competes with the private sector for customers. Net position increased by $208 thousand, to $50.3 million, primarily from storm water infrastructure contributed by developers of $255 thousand and investment earnings of $951 thousand. Operating loss was $1.1 million, which is consistent with the prior year. The loss is largely due to the escalating costs of the recycling program, which totaled $714 thousand. The increased costs of recycling are directly attributable to the industry-wide cost to recycle products. This is due to steep restrictions for the percentage of allowable contamination in the global recycling stream beginning in 2018. 20 Table of Contents The following graph compares the fiscal year revenues to expenses for the Water, Wastewater and Environmental Services Funds. General Fund Budgetary Highlights There was a difference of ($2.2) million between the original adopted expenditure budget and the final amended expenditure budget. The final amended budget projected that revenues would exceed expenditures by $8.1 million resulting in a $61.1 million reduction to fund balance after other financing sources and uses per the budget. The difference between the original adopted budget and final amended budget is was mainly due to budgeting $10.5 million more in police expenditures, $11.0 million less in contingency, and $1.9 million more in transfers out. During the year, actual revenues exceeded the budgeted amount by $22.6 million (10.3%) mainly due to higher than expected sales taxes collected of $10.6 million, higher than expected intergovernmental revenue of $22.6 million due to the non-budgeted AZ CARES funding received, offset by $13.3 million lower than expected other entities’ participation collections which varies year by year. Actual expenditures were less than budgeted by $35.6 million (16.9%) mainly due to lower than expected expenditures of $3.4 million in management and policy, $3.5 million in parks and recreation, $4.6 million in non-departmental, and $7.1 million of capital outlay. These were mainly the result of a reduced spending directive due to the uncertainties of how COVID-19 would affect Gilbert financially. This resulted in an excess of revenues over expenditures of $58.1 million more than budgeted. Other financing sources and uses came in $66.2 million higher than expected due to a non-budgeted land sale of $19.3 million and $47.0 million less than expected of transfers out of $21.3 million to the Municipal Facilities Capital Project Fund and $12.3 million less to the Streets Capital Project Fund. This also resulted in the actual net change in fund balance being $124.4 million more than budgeted. Capital Asset and Debt Administration Capital Assets. As of June 30, 2020, Gilbert had $1.7 billion in capital assets, which is an increase of $48.0 million (3.0%) over prior year. This was due to increases in construction-in-progress for streets, parks and municipal facilities offset by the depreciation expense taken. Major capital improvements projects completed during the year included the following: Governmental Activities     Gilbert Road and Baseline Road north to Guadalupe Street improvements of $5.5 million Higley Road Reconstruction street improvements of $1.2 million Stonebridge Lakes Reconstruction street improvements of $3.6 million Developer contributions of street related infrastructure valued at $5.7 million 21 Table of Contents Business-type Activities   Heritage District north waterline replacements totaling $9.1 million North Water Treatment Plant (NWTP) reservoir water quality improvements and north reservoir roof replacement of $3.6 million Fiesta Tech sewer service and lift station improvements of $5.6 million Crossroads force main repair at Williams Field totaling $1.6 million Developer contributions of water, wastewater, and storm water infrastructure valued at $4.2 million    The following table presents capital assets balances, net of accumulated depreciation, for the fiscal years ended June 30, 2020 and 2019. Town of Gilbert Capital Assets (net of depreciation) Governmental Activities Land Nondepreciable w ater rights Business-type Activities 2020 2019 2020 $ 146,382,648 $ 184,321,561 $ Total 2019 2020 2019 23,510,321 $ 23,510,621 $ 169,892,969 $ 207,832,182 - - 58,150,151 57,129,947 58,150,151 57,129,947 Construction-in-progress 197,705,823 88,219,026 45,659,772 41,210,231 243,365,595 129,429,257 Buildings 137,578,043 147,695,236 - - 137,578,043 147,695,236 Improvements 20,980,569 24,418,233 - - 20,980,569 24,418,233 Plant, machinery & equip 19,925,635 22,096,986 63,598,824 69,242,746 83,524,459 91,339,732 Depreciable w ater rights - - 37,635,866 38,046,294 37,635,866 38,046,294 519,717,464 539,647,265 383,011,729 370,316,041 902,729,193 909,963,306 Total Capital Assets $ 1,042,290,182 $ 1,006,398,307 611,566,663 $ 599,455,880 $ 1,653,856,845 $ 1,605,854,187 Infrastructure $ Total governmental capital assets increased $35.9 million and business-type capital assets increased $12.1 million. The change in governmental capital assets can be attributed to an increase in construction-in-progress additions of $121.2 million and improvements in infrastructure of $16.9 million. These additions were offset by construction-in-progress deletions of $11.8 million, depreciation taken during the fiscal year of $54.4 million and the sale of land totaling $42.0 million. Most of the increase for the business-type capital assets can be attributable to additions in construction-in-progress of $28.7 million and infrastructure of $28.6 million. These additions were offset by completed projects of $24.3 million and depreciation expense of $23.8 million. See Note 5 on pages 57-58 for further information regarding capital assets. Long-term Debt. At June 30, 2020, Gilbert had total bonded debt obligations of $249.1 million related to governmental activities and $132.9 million in business-type activities; $151.8 million of the outstanding debt is general obligation (GO) bonds backed by the full faith and credit of the Town of Gilbert; $4.5 million is special assessment bonds secured by a lien against the land of the benefited property owners in Improvement Districts #19 and #20; and all other outstanding debt is secured by pledges of specific revenue sources. The Arizona Constitution and State Statutes limit a municipality’s bonded debt capacity to certain percentages of its limited property valuation and by the type of project to be constructed with GO bonds. For projects involving water, wastewater, artificial lighting, parks, open space, recreational facility improvements, streets, public safety, and fire and emergency facilities, Gilbert can issue GO bonds up to 20% of its limited property valuation. For any other general-purpose improvements, Gilbert may issue bonds up to 6% of its limited property valuation. Gilbert’s available debt margin at June 30, 2020 was $186.8 million in the 6% capacity and $459.9 million in the 20% capacity. See Note 7 on pages 59-64 for additional information on debt. 22 Table of Contents The following schedule shows Gilbert’s outstanding debt as of June 30, 2020 and 2019. Town of Gilbert Outstanding Debt Governmental Activities 2020 $ 151,825,000 4,510,000 Special Assessment 34,955,000 Revenue Obligations 57,760,000 Municipal Property Corporation Totals $ 249,050,000 General Obligation Business-type Activities 2019 $ 110,445,000 4,895,000 35,655,000 73,560,000 $ 224,555,000 2020 $ 132,865,000 $ 132,865,000 Total 2019 2020 2019 140,090,000 $ 140,090,000 $ 151,825,000 4,510,000 34,955,000 190,625,000 $ 381,915,000 $ 110,445,000 4,895,000 35,655,000 213,650,000 $ 364,645,000 $ Gilbert’s bonds are rated by leading rating agencies that assess the risk of default based on Gilbert’s financial condition. The following schedule shows Gilbert’s bond ratings as of June 30, 2020. Town of Gilbert Long-term Debt Ratings As of June 30, 2020 Moody's Investor Service Aaa Aa1 Not rated Aa1 Aa1 General Obligation Public Facilities Municipal Property Corporation Water Resources Municipal Property Corporation Subordinate Lien Pledged Revenue Obligations Improvement Districts Standard and Poors Ratings Service AAA AAA AAA AAA AA- Fitch Ratings AAA AAA AAA AAA Not rated Economic Factors and Next Year’s Budget As discussed in the letter of transmittal under Factors Affecting Financial Condition, in the spring of 2020, as Gilbert was gearing up to celebrate its Centennial and promote its new mission statement, “City of the Future,” the COVID-19 pandemic engulfed not only our community, but the entire world. In an unprecedented move, schools and nonessential businesses were closed with their employees being either laid off or sent home to work off-site as “social distancing” became the “new normal.” In response to the pandemic, Gilbert kept the safety of its team members and the health of its community at the forefront of decision-making as we worked to find innovative new ways to deliver the same exceptional services to our residents and businesses. For fiscal year 2021, we hope to continue to successfully reopen community operations while dealing with the economic aftershocks of the pandemic. While the current challenges may be larger, fluid and more complex than anything in recent memory, including the Great Recession, our response will be no different. We will continue to rise to the occasion. In fiscal year 2020, Gilbert’s economic development initiatives continued to yield positive results for the community, and Gilbert’s northwest employment area and central business district continued to thrive. In the northwest corridor, Northrop Grumman announced a major expansion with the addition of a new 120,000 square foot office building and a 100,000 square-foot expansion of their satellite manufacturing facility. The office building broke ground in January 2020, and the manufacturing facility broke ground in the Summer of 2020. In the central business district, Rivulon completed construction on buildings 3 and 4 at the Commons, a 400,000+ square-foot development ideal for technology centers, creative firms and back office users. This has further strengthened Rivulon’s position as a top destination for corporate office investment. The Reserve at SanTan also welcomed Progressive Insurance’s newest claim center and added an additional 160,000 square-feet of office to the development. 23 Table of Contents In the Heritage District, LGE Design Build completed construction on a new 40,000 square-foot four-story mixed-use retail/office building called The Collab, and Gilbert entered into an agreement for the development of the 9.1-acre site at the northern end of the Heritage District that is expected to consist of at least 500,000 gross square-feet, including Class A office space, retail space, a hotel and multifamily housing. A community of excellence demands exceptional governance, and Gilbert’s Council and executive leadership stepped up. Gilbert undertakes a zero-based budgeting process for one-third of the organization every year, and always applies priority, program, and performance-based approaches. Since fiscal year 2018, nearly $7.0 million has been removed due to the zero-based efforts. Directors are tasked with balancing the budget through consensus, rather than presenting requests and waiting to hear back. Only once the directors achieve consensus is the Town Manager presented with the recommended budget. This collaborative approach allows Gilbert to promote transparency, the importance of short- and long-term planning, and maintain a strong return on investment for the zero-based process while staying focused on the citizens and businesses that we all serve in different capacities. Budget Highlights for Fiscal Year 2021 The budget for fiscal year 2021 reflects an effort to deliver both effective and efficient services to our community. Even given Gilbert’s growth, the budget is balanced, and applies the non-recurring level of construction-related revenues toward non-recurring costs. The adopted budget is based off conservative revenue estimates which provide flexibility in responding to possible impacts from COVID-19. Should impacts deepen, Gilbert has already identified a list of medium and large impact items that could be removed or postponed to provide additional flexibility for Gilbert to maintain a balanced budget. Check-in times have been established in August and October (with additional times as needed) to review revenue strength and determine what measures should be implemented to best keep the budget balanced and fiscally stable. With carry forwards and contingency adjustments, the budget of $992,839,910 is a decrease of $56.0 million from fiscal year 2020. The efforts will help Gilbert maintain balanced revenues and expenditures. The budget also includes a capital projects contingency budget of $100.0 million to allow Council the flexibility and legal authority to respond to community needs. This contingency is consistent with practice in prior years. Balanced Financial Plan: The fiscal year 2021 budget is balanced based upon identified revenues and expenditures. Constitutional Expenditure Limit: The fiscal year 2021 budget reflects expenses that will be under the constitutional expenditure limitation. Staff regularly monitors conformity with the constitutional expenditure requirements and will recommend, if necessary, continuing adjustments and modifications necessary to comply with expenditure limitation requirements. State-Shared Revenues: The fiscal year 2021 budget reflects state-shared revenues based upon census population adjustments and statutory distribution formulas, considering currently projected state sales and income tax collections (provided by the Arizona League of Cities and Towns), which reflect the state’s budgeted HURF distributions. Revenue estimates were further reduced to provide additional flexibility in navigating potential COVID-19 economic impacts. Secondary Property Tax Levy: Council voted to adopt a tax levy of $25.9 million, which maintains the tax rate of $0.99 per $100 of assessed value. Fund Balance: The Revenue Summary in the budget lists the use of carry over funds in an amount of $431.0 million. This reflects use of revenues which were received in prior fiscal years in excess of minimum fund balance. Capital Project Financing – System Development Fees: The fiscal year 2021 budget reflects revenues projected from the continued collection of System Development Fees as allowed under current State Law. 24 Table of Contents Financial Contact This financial report is designed to provide a general overview of Gilbert’s finances and to demonstrate accountability for the use of public funds. This report is also available on Gilbert’s website at www.gilbertaz.gov. Questions about any of the information provided in this report, or requests for additional financial information should be addressed to: Town of Gilbert Accounting Manager 50 E Civic Center Drive Gilbert, AZ 85296 (480) 503-6930 25 26 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Net Position June 30, 2020 Primary Government Assets Pooled cash and investments Restricted cash and investments Receivables, net: Taxes Special assessments Accrued interest Accounts Due from other governments Prepaid items Inventories Restricted accrued interest Internal balances Investment in joint venture Capital assets: Non-depreciable Depreciable net Total assets Deferred outflows of resources Deferred charge on refundings Pensions and other post-employment benefits Total deferred outflows of resources Liabilities Accounts payable Accrued liabilities Claims payable Deposits held for others Utility deposits Bond interest payable Unearned revenue Noncurrent liabilities: Due within one year Due in more than one year Total liabilities Deferred inflows of resources Pensions and other post-employment benefits Total deferred inflows of resources Net position Net investment in capital assets Restricted for: Capital projects Court/police programs Debt service Highway and streets Other purposes Special districts Transportation Unrestricted Total net position Governmental Activities Business-type Activities $ $ 297,820,720 12,384,691 258,529,156 25,231,367 Total $ 556,349,876 37,616,058 Component Unit Industrial Development Authority $ 17,167 - 13,717,122 4,437,950 994,912 12,917,313 28,277,071 2,307,116 1,040,193 (1,800,228) 1,736,784 866,507 4,903,125 359,156 399,194 58,600 8,771 1,800,228 186,774,040 13,717,122 4,437,950 1,861,419 17,820,438 28,636,227 2,706,310 1,098,793 8,771 188,510,824 - 344,088,471 698,201,711 1,416,123,826 127,320,244 484,246,419 1,090,496,807 471,408,715 1,182,448,130 2,506,620,633 17,167 4,864,518 55,250,549 60,115,067 2,447,391 3,068,365 5,515,756 7,311,909 58,318,914 65,630,823 - 24,043,477 9,797,406 2,025,000 1,888,541 1,180,803 1,486,075 11,842,521 985,166 1,946,073 2,932,656 - 35,885,998 10,782,572 2,025,000 1,888,541 1,946,073 4,113,459 1,486,075 10 - 39,449,294 375,919,761 455,790,357 8,445,801 166,753,076 192,905,293 47,895,095 542,672,837 648,695,650 10 9,951,074 9,951,074 1,640,558 1,640,558 11,591,632 11,591,632 - 804,916,527 468,440,304 1,273,356,831 - 53,027,758 2,123,113 8,949,041 8,060,127 123,810 358,782 300,035 132,638,269 $ 1,010,497,462 24,872,533 408,153,875 901,466,712 77,900,291 2,123,113 8,949,041 8,060,127 123,810 358,782 300,035 540,792,144 $ 1,911,964,174 17,157 17,157 The notes to financial statements are an integral part of this statement. 27 $ $ Table of Contents TOWN OF GILBERT, ARIZONA Statement of Activities For the Year Ended June 30, 2020 Functions/Programs Primary government: Governmental activities: General government Management and policy Finance and management services Court Development services Public safety Police Fire Highways and streets Parks and recreation Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities Charges for Services Expenses $ Program Revenues Operating Grants and Contributions 23,430,414 2,590,722 3,946,778 10,897,963 $ 22,334 12,027 534,926 6,866,871 $ 1,287,783 37,971 278,032 Capital Grants and Contributions $ 192,623 - 65,972,487 41,373,244 61,413,551 26,844,019 655,050 5,075,953 9,641,221 251,841,402 1,827,225 827,159 13,054 4,799,749 383,265 15,286,610 14,817,095 10,087,608 26,966,006 136,841 49,884 53,661,220 1,721,341 2,867,984 23,497,349 10,624,563 642,587 128,356 39,674,803 Business-type activities: Water Wastewater Environmental Services Total business-type activities Total primary government 49,373,198 30,930,246 22,927,911 103,231,355 $ 355,072,757 48,781,943 29,771,746 21,918,466 100,472,155 $ 115,758,765 $ 1,697,653 1,697,653 55,358,873 $ 13,724,625 4,339,478 254,820 18,318,923 57,993,726 Component unit: Industrial Development Authority $ $ $ - $ - 10 - General revenues: Sales taxes Property taxes In-Lieu property taxes Franchise taxes Unrestricted state-shared revenue Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain (loss) on sale of capital assets Miscellaneous Transfers Total general revenues and transfers Change in net position Net position - beginning Net position - ending The notes to financial statements are an integral part of this statement. 28 Table of Contents Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Activities Business-type Activities $ $ $ (21,927,674) (2,578,695) (3,373,881) (3,753,060) Total - $ (21,927,674) (2,578,695) (3,373,881) (3,753,060) Component Unit Industrial Development Authority $ - (47,606,826) (27,590,493) (10,937,142) (11,282,866) (12,463) (4,514,448) (9,641,221) (143,218,769) - (47,606,826) (27,590,493) (10,937,142) (11,282,866) (12,463) (4,514,448) (9,641,221) (143,218,769) - (143,218,769) 14,831,023 3,180,978 (754,625) 17,257,376 17,257,376 14,831,023 3,180,978 (754,625) 17,257,376 (125,961,393) - 107,533,991 26,569,667 1,014,544 2,744,105 57,801,651 2,762,422 10,467,209 (3,973,409) 674,421 (96,453) 205,498,148 62,279,379 948,218,083 1,010,497,462 9,820,041 147,543 680,116 96,453 10,744,153 28,001,529 873,465,183 $ 901,466,712 $ 107,533,991 26,569,667 1,014,544 2,744,105 57,801,651 2,762,422 20,287,250 (3,825,866) 1,354,537 216,242,301 90,280,908 1,821,683,266 1,911,964,174 $ (10) $ 4 4 (6) 17,163 17,157 29 Table of Contents TOWN OF GILBERT, ARIZONA Balance Sheet Governmental Funds June 30, 2020 General Assets Pooled cash and investments Restricted cash and investments Receivables, net: Taxes Special assessments Accrued interest Accounts Due from other governments Due from other funds Prepaid items Inventories Advances to other funds Total assets $ 174,749,410 179,243 Streets Special Revenue Streets and Traffic Capital Projects Parks Capital Projects $ $ $ 9,180,443 - 59,405,162 - 15,811,281 - 13,558,288 600,513 11,157,187 23,902,273 970,733 2,307,116 244,336 13,281,380 240,950,479 32,099 9,096 1,282,110 10,503,748 198,643 220 59,604,025 47,316 15,858,597 Liabilities Accounts payable Accrued liabilities Deposits held for others Due to other funds Interest payable Advances from other funds Unearned revenue Bonds payable Total liabilities 5,352,334 9,472,224 1,888,541 500,129 17,213,228 1,698,298 186,250 1,884,548 6,803,379 6,803,379 3,411,079 3,411,079 Deferred inflows of resources Unavailable revenue - sales tax Unavailable revenue - special assessments Unavailable revenue - court fines Unavailable revenue - grants Unavailable revenue - other Total deferred inflow of resources 121,119 5,840,668 40,079 6,001,866 - - - 23,215,094 1,884,548 6,803,379 3,411,079 15,832,832 68,001,901 133,900,652 217,735,385 8,619,200 8,619,200 52,800,646 52,800,646 12,447,518 12,447,518 Total liabilities and deferred inflows of resources Fund balances Nonspendable Restricted Assigned Unassigned Total fund balances Total liabilities, deferred inflows of resources, and fund balances $ 240,950,479 The notes to financial statements are an integral part of this statement. 30 $ 10,503,748 $ 59,604,025 $ 15,858,597 Table of Contents Municipal Facilities Capital Projects $ $ 23,542,714 - Debt Service Special Assessments Debt Service Other Governmental Funds Total Governmental Funds $ $ $ $ 1,692,615 12,205,448 179,020 - 2,407,391 - 286,968,036 12,384,691 68,038 23,610,752 148,650 5,766 14,052,479 4,437,950 599 4,617,569 10,184 5,972 4,050 3,062,135 5,489,732 13,717,122 4,437,950 958,946 11,170,553 28,246,518 970,733 2,307,116 244,336 13,281,380 374,687,381 5,744,274 13,281,380 19,025,654 204 1,180,803 8,540,000 9,721,007 - 675,837 43,529 970,733 985,946 2,676,045 23,685,405 9,702,003 1,888,541 970,733 1,180,803 13,281,380 1,486,075 8,540,000 60,734,940 - - 4,414,936 4,414,936 619,875 619,875 121,119 4,414,936 5,840,668 619,875 40,079 11,036,677 19,025,654 9,721,007 4,414,936 3,295,920 71,771,617 20,251,009 (15,665,911) 4,585,098 4,331,472 4,331,472 202,633 202,633 2,975,633 (781,821) 2,193,812 15,832,832 101,628,111 68,001,901 117,452,920 302,915,764 23,610,752 $ 14,052,479 $ 4,617,569 $ 5,489,732 31 $ 374,687,381 32 Table of Contents TOWN OF GILBERT, ARIZONA Reconciliation of Balance Sheet To the Statement of Net Position June 30, 2020 $ Fund balances of governmental funds 302,915,764 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. 1,886,179,896 (843,993,410) Governmental capital assets Accumulated depreciation 1,042,186,486 The investment in joint venture is not a financial resource and, therefore, is not reported in the funds. 1,736,784 Some receivables are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the governmental funds. 11,036,677 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance, to the individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position, but are not included on the governmental funds balance sheet. 7,226,604 Deferred outflows and inflows of resources related to pensions, other post-employment benefits, and deferred charges on debt refundings are applicable to future reporting periods and, therefore, are not reported in the funds. Unamortized deferred outflow on bond refunding Pension and other post-employment benefits-related items 4,864,518 45,162,700 50,027,218 (240,510,000) (25,420,362) (16,124,803) (620,190) (121,956,716) (404,632,071) Certain liabilities applicable to Gilbert's governmental activities are not due and payable in the current period, and accordingly are not reported as fund liabilities in the governmental funds balance sheet. Bonds payable Bonds premium Compensated absences Net other post-employment benefits Net pension Net position of governmental activities - statement of net position The notes to financial statements are an integral part of this statement. 33 $ 1,010,497,462 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2020 General Revenues Taxes: Sales Property Franchise Special assessments Licenses and permits Charges for services Intergovernmental Fines and forfeitures Other entities' participation System development fees Gifts and donations Investment earnings Miscellaneous Total revenues Expenditures Current: General government: Management and policy Finance and management services Court Development services Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service: Principal Interest Bond issuance costs Fiscal and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures $ 107,551,991 2,744,105 4,688,768 13,005,244 94,251,408 2,730,262 9,799,491 182,611 6,004,925 530,842 241,489,647 Streets Special Revenue $ 630 16,425,482 9,206 385,167 143,311 16,963,796 Streets and Traffic Capital Projects Parks Capital Projects $ $ 4,537,225 3,509,694 2,175,649 10,222,568 10,171,730 537,614 10,709,344 25,533,779 2,681,130 3,185,950 8,188,742 - - - 68,477,567 35,745,075 5,985,186 19,238,742 4,904,482 14,983,624 - 185,695 - 100,343 - 1,305,823 175,246,476 66,243,171 21,845 15,005,469 1,958,327 37,113,751 37,299,446 (27,076,878) 35,162,044 35,262,387 (24,553,043) Other financing sources (uses) Transfers in Transfers out Proceeds from the sale of capital assets General obligation bonds issued Premium on bonds issued Refunding bonds issued Premium on refunding bonds Total other financing sources (uses) 1,281,500 (23,608,128) 19,340,128 (2,986,500) (920,410) (920,410) 6,011,201 (1,131,598) 4,879,603 6,030,247 (4,857,447) 19,129,637 20,302,437 Net change in fund balances 63,256,671 1,037,917 (22,197,275) (4,250,606) Fund balances - beginning Fund balances - ending 154,478,714 $ 217,735,385 The notes to financial statements are an integral part of this statement. 34 $ 7,581,283 8,619,200 $ 74,997,921 52,800,646 $ 16,698,124 12,447,518 Table of Contents Municipal Facilities Capital Projects $ $ 7,289,603 591,259 7,880,862 Debt Service Special Assessments Debt Service $ $ 23,875,747 299,945 24,175,692 Other Governmental Funds 744,008 2,222 7,666 753,896 $ Total Governmental Funds 2,693,920 146,022 2,063,001 344,916 96,994 83,098 269 5,428,220 $ 107,551,991 26,569,667 2,744,105 744,008 4,688,768 13,154,118 117,277,116 3,084,384 9,799,491 20,971,027 279,605 10,085,323 674,422 317,624,025 - - - 1,320,011 65 304,828 5,544 26,853,790 2,681,195 3,490,778 8,194,286 157,087 121,587 - - 815,323 137,531 2,029,415 1,248,704 651,550 49,884 69,449,977 35,882,606 23,183,920 20,587,789 651,550 5,075,953 646,945 51,432,304 52,357,923 (44,477,061) 48,670,000 9,628,392 205,734 12,356 58,516,482 (34,340,790) 385,000 239,908 750 625,658 128,238 2,057,605 8,620,460 (3,192,240) 49,055,000 9,868,300 852,679 13,106 127,093,372 382,934,301 (65,310,276) 1,040,321 (5,748,221) 61,730,000 4,139,268 61,161,368 17,918,025 15,020,000 1,438,165 34,376,190 - 4,493,100 (605,043) 3,888,057 36,774,394 (36,870,847) 38,469,765 61,730,000 4,139,268 15,020,000 1,438,165 120,700,745 16,684,307 35,400 128,238 695,817 55,390,469 1,497,995 2,193,812 247,525,295 $ 302,915,764 (12,099,209) 4,585,098 $ 4,296,072 4,331,472 $ 74,395 202,633 $ 35 36 Table of Contents TOWN OF GILBERT, ARIZONA Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities For the Year Ended June 30, 2020 Net change in fund balances - total governmental funds $ 55,390,469 Amounts reported for governmental activities in the statement of net position are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. 127,093,372 (54,394,233) Capital outlay Depreciation expense 72,699,139 (42,559,401) The net effect of various miscellaneous transactions involving capital assets is to decrease net position. Issuance of debt, applicable premium and payment to refunded bond escrow agent are reported as a financing source (use) in the governmental funds and thus contribute to the change in fund balance. In the government-wide statements, however, issuing debt increases long-term liabilities in the statement of net position and does not affect the statement of activities. Bond premium is deferred and amortized in the statement of activities. (82,327,433) Repayment of bond principal is reported as expenditures in governmental funds and thus has the effect of reducing fund balance because current financial resources have been used. For the government-wide statements, however, the principal payments reduce the long-term liabilities in the statement of net position and do not result in an expense in the statement of activities. Also, governmental funds report the effect of deferred outflows and resources, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. 49,055,000 1,092,864 Principal payments Amortization expense 50,147,864 Internal service funds are used by management to charge the costs of certain activities, such as equipment maintenance, to the individual funds. The adjustments for internal service funds "close" those funds by charging the additional amounts to participating governmental activities to completely cover the internal service funds' costs for the year. 2,044,478 Capital assets contributed by developers are not shown on the governmental fund statements but are included in the assets of Gilbert. On the statement of activities, these donations are shown as capital contributions. 5,726,631 Compensated absence expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. (989,223) Pension/OPEB contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the statement of net position because the reported net pension/OPEB liability is measured a year before the report date. Pension/OPEB expense, which is the change in the net pension/OPEB liability adjusted for changes in deferred outflows and inflows of resources related to pensions/OPEB, is reported in the statement of activities. Pension/OPEB contributions Pension/OPEB expense 31,550,786 (28,548,531) 3,002,255 (503,108) (994,246) (18,000) 619,875 40,079 (855,400) Certain revenues are not reported in the governmental funds because they do not provide current financial resources due to unavailability but are recognized as revenue in the statement of activities. However, other revenues in the governmental funds that provide current financial resources are not included in the statement of activities because they were recognized in a prior period. Special assessments Court fines Sales tax Grants Other Change in net position of governmental activities - statement of activities The notes to financial statements are an integral part of this statement. $ 37 62,279,379 Table of Contents TOWN OF GILBERT, ARIZONA General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Budgeted Amounts Original Revenues Taxes: Sales Franchise Licenses and permits Charges for services Intergovernmental Fines and forfeitures Other entities' participation Gifts and donations Investment earnings Miscellaneous Total revenues $ 97,000,000 2,945,000 4,310,000 13,565,500 71,630,000 3,522,000 23,066,000 38,000 685,000 2,176,500 218,938,000 Final $ Actual 97,000,000 2,945,000 4,310,000 13,565,500 71,630,000 3,522,000 23,066,000 38,000 685,000 2,176,500 218,938,000 $ 107,551,991 2,744,105 4,688,768 13,005,244 94,251,408 2,730,262 9,799,491 182,611 6,004,925 530,842 241,489,647 Variance with Final Budget Positive (Negative) $ 10,551,991 (200,895) 378,768 (560,256) 22,621,408 (791,738) (13,266,509) 144,611 5,319,925 (1,645,658) 22,551,647 Expenditures Current: General government: Management and policy Finance and management services Court Development services Public safety: Police Fire Highways and streets Parks and recreation Non departmental Capital outlay Contingency Total expenditures 27,948,175 2,679,070 3,430,020 8,794,720 28,917,676 2,691,580 3,427,040 9,025,640 25,533,779 2,681,130 3,185,950 8,188,742 3,383,897 10,450 241,090 836,898 59,274,880 35,160,230 5,644,530 22,672,990 9,049,760 8,688,900 25,295,000 208,638,275 69,775,472 35,911,570 6,095,780 22,771,783 9,482,300 8,381,079 14,331,256 210,811,176 68,477,567 35,745,075 5,985,186 19,238,742 4,904,482 1,305,823 175,246,476 1,297,905 166,495 110,594 3,533,041 4,577,818 7,075,256 14,331,256 35,564,700 Excess of revenues over expenditures 10,299,725 8,126,824 66,243,171 58,116,347 Other financing sources (uses) Transfers in Transfers out Proceeds from the sale of capital assets Total other financing sources (uses) 1,420,410 (68,762,355) (67,341,945) 1,426,520 (70,649,070) (69,222,550) 1,281,500 (23,608,128) 19,340,128 (2,986,500) (145,020) 47,040,942 19,340,128 66,236,050 $ (57,042,220) $ (61,095,726) 63,256,671 154,478,714 $ 217,735,385 $ 124,352,397 Net change in fund balances Fund balances - beginning Fund balances - ending The notes to financial statements are an integral part of this statement. 38 Table of Contents TOWN OF GILBERT, ARIZONA Streets Special Revenue Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Budgeted Amounts Original Revenues Charges for services Intergovernmental Fines and forfeitures Investment earnings Miscellaneous Total revenues $ Expenditures Current: Highways and streets Capital outlay Contingency Total expenditures 16,500,000 45,000 16,545,000 Final $ 16,500,000 45,000 16,545,000 Actual $ 630 16,425,482 9,206 385,167 143,311 16,963,796 Variance with Final Budget Positive (Negative) $ 630 (74,518) 9,206 340,167 143,311 418,796 15,655,080 136,000 500,000 16,291,080 15,727,270 21,850 541,960 16,291,080 14,983,624 21,845 15,005,469 743,646 5 541,960 1,285,611 Excess of revenues over expenditures 253,920 253,920 1,958,327 1,704,407 Other financing uses Transfers out Total other financing uses (920,410) (920,410) (920,410) (920,410) (920,410) (920,410) - (666,490) 1,037,917 7,581,283 8,619,200 Net change in fund balances Fund balances - beginning Fund balances - ending $ (666,490) $ $ The notes to financial statements are an integral part of this statement. 39 $ 1,704,407 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Net Position Proprietary Funds June 30, 2020 Water Assets Current assets: Pooled cash and investments Restricted cash and investments Receivables (net): Accrued interest Accounts Restricted accrued interest Due from other governments Prepaid items Inventories Total current assets Business-type Activities - Enterprise Funds Environmental Total Enterprise Wastewater Services Funds $ 125,502,768 22,413,992 $ 108,056,091 2,817,375 417,017 2,766,137 7,860 352,728 399,194 58,600 151,918,296 362,557 1,248,113 911 2,053 112,487,100 86,933 888,875 4,375 25,950,480 866,507 4,903,125 8,771 359,156 399,194 58,600 290,355,876 35,966 1,746,760 30,553 795,857 13,461,820 85,347,711 101,426,329 - 186,774,040 - 91,889,775 282,693,341 459,930,827 611,849,123 34,962,946 169,717,034 306,106,309 418,593,409 467,523 31,836,044 32,303,567 58,254,047 127,320,244 484,246,419 798,340,703 1,088,696,579 4,906 98,790 103,696 13,565,516 Deferred outflows of resources Pensions and other post-employment benefits Deferred charge on refundings Total deferred outflows of resources 1,557,278 2,447,391 4,004,669 538,691 538,691 972,396 972,396 3,068,365 2,447,391 5,515,756 292,587 292,587 Liabilities Current liabilities: Accounts payable Accrued liabilities Current portion of accrued compensated absences Claims payable Bond interest payable Bonds payable Utility deposits Total current liabilities 4,391,335 492,255 441,287 2,130,281 5,545,000 1,903,048 14,903,206 6,710,450 161,435 185,589 802,375 2,015,000 9,874,849 740,736 331,476 258,925 43,025 1,374,162 11,842,521 985,166 885,801 2,932,656 7,560,000 1,946,073 26,152,217 358,072 95,403 74,210 2,025,000 2,552,685 Noncurrent liabilities: Utility revenue bonds payable Long term portion of compensated absences Other post-employment benefits Net pension liability Total noncurrent liabilities Total liabilities 110,309,674 847,512 67,789 10,554,208 121,779,183 136,682,389 33,873,077 409,830 23,104 3,653,672 37,959,683 47,834,532 442,243 50,952 6,521,015 7,014,210 8,388,372 144,182,751 1,699,585 141,845 20,728,895 166,753,076 192,905,293 130,358 13,202 1,979,214 2,122,774 4,675,459 Deferred inflows of resources Pensions and other post-employment benefits Total deferred inflows of resources 824,511 824,511 284,546 284,546 531,501 531,501 1,640,558 1,640,558 155,812 155,812 272,584,193 414,937 205,347,762 $ 478,346,892 163,552,544 24,457,596 183,002,882 $ 371,013,022 32,303,567 18,003,003 50,306,570 468,440,304 24,872,533 406,353,647 899,666,484 103,696 8,923,136 9,026,832 Noncurrent assets: Investment in joint venture Capital assets: Non-depreciable Depreciable, net Total noncurrent assets Total assets Net position Net investment in capital assets Restricted for capital projects Unrestricted Total net position $ $ 24,970,297 - Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business-type activities The notes to financial statements are an integral part of this statement. 40 $ $ 258,529,156 25,231,367 Governmental Activities Internal Service Funds 1,800,228 901,466,712 $ $ 10,852,684 - Table of Contents TOWN OF GILBERT, ARIZONA Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2020 Governmental Activities - Business-type Activities - Enterprise Funds Operating revenues Charges for services Other Total operating revenues $ Water Wastewater Environmental Services 48,781,943 218,460 49,000,403 $ $ 29,771,746 147,082 29,918,828 Total Enterprise Funds 21,918,466 314,579 22,233,045 $ 100,472,155 680,121 101,152,276 Internal Service Funds $ 26,236,067 4,189,221 30,425,288 Operating expenses General and administrative Personnel services Operation and maintenance Claims incurred Depreciation Allocation of indirect expenses Total operating expenses 1,533,249 10,537,214 15,821,985 15,967,379 2,407,280 46,267,107 808,459 5,041,269 10,935,935 11,818,977 1,141,920 29,746,560 1,147,121 7,745,579 8,672,298 4,600,080 1,137,300 23,302,378 3,488,829 23,324,062 35,430,218 32,386,436 4,686,500 99,316,045 1,600,682 1,979,543 4,557,884 19,966,278 17,527 28,121,914 Operating income (loss) 2,733,296 172,268 (1,069,333) 1,836,231 2,303,374 Nonoperating revenues (expenses) Interest expense Intergovernmental Investment earnings Gain on sale of capital assets Total nonoperating revenues (expenses) (3,294,648) 1,697,653 4,719,827 55,916 3,178,748 (1,261,425) 4,149,132 20,380 2,908,087 951,065 71,247 1,022,312 (4,556,073) 1,697,653 9,820,024 147,543 7,109,147 381,879 381,879 Income (loss) before contributions and transfers 5,912,044 3,080,355 (47,021) 8,945,378 2,685,253 Capital contributions Transfers in Transfers out 13,724,625 131,453 (702,834) 4,339,478 667,834 - 254,820 - 18,318,923 799,287 (702,834) - Change in net position 19,065,288 8,087,667 207,799 27,360,754 2,685,253 Total net position - beginning 459,281,604 362,925,355 50,098,771 $ 478,346,892 $ 371,013,022 Total net position - ending $ 50,306,570 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Changes in net position of business-type activities The notes to financial statements are an integral part of this statement. 41 6,341,579 $ $ 640,775 28,001,529 9,026,832 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2020 Governmental Activities Business-type Activities - Enterprise Funds Cash flows from operating activities Cash receipts from customers Other operating cash receipts Cash receipts from other funds for services Cash receipts from deposits Cash payments to suppliers for goods and services Cash payments to employees for services Cash payments to other funds for services Net cash provided by operating activities $ Water Wastewater Environmental Services 49,202,126 218,460 (140,827) (17,683,454) (9,771,608) (2,407,280) 19,417,417 $ $ 29,971,399 145,027 (15,089,577) (4,606,790) (1,141,920) 9,278,139 Total Enterprise Funds 22,056,021 315,603 17,550 (11,123,473) (7,634,733) (1,137,300) 2,493,668 $ 101,229,546 679,090 (123,277) (43,896,504) (22,013,131) (4,686,500) 31,189,224 Internal Service Funds $ 276,553 4,181,934 25,069,055 (25,673,048) (2,126,709) 1,727,785 Cash flows from noncapital financing activities Transfers from other funds Transfers to other funds Net cash provided (used) by noncapital financing activities 131,453 (702,834) (571,381) 667,834 667,834 - 799,287 (702,834) 96,453 - Cash flows from capital and related financing activities Acquisition and construction of capital assets Proceeds from development fees Cash paid for interest and fiscal charges Principal payments on bonds Proceeds from intergovernmental agreements Proceeds from sale of capital assets Net cash used by capital and related financing activities (21,122,047) 10,630,039 (4,394,188) (5,285,000) 1,658,803 55,916 (18,456,477) (25,928,222) 3,474,547 (1,645,050) (1,940,000) 29,700 (26,009,025) (771,398) 71,247 (700,151) (47,821,667) 14,104,586 (6,039,238) (7,225,000) 1,658,803 156,863 (45,165,653) (61,437) (61,437) 4,965,118 4,965,118 4,293,639 4,293,639 958,554 958,554 10,217,311 10,217,311 381,520 381,520 5,354,677 142,562,083 $ 147,916,760 (11,769,413) 122,642,879 $ 110,873,466 $ 2,752,071 22,218,226 24,970,297 (3,662,665) 287,423,188 $ 283,760,523 $ 2,047,868 8,804,816 10,852,684 $ $ $ (1,069,333) $ $ 2,303,374 Cash flows from investing activities Interest received on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation Changes in assets and liabilities: Accounts receivable Due from other governments Prepaid items Inventories Deferred outflows of resources Accounts payable Claims payable Deposits Accrued expenses Other post-employment benefits Net pension liability Deferred inflows of resources Net cash provided by operating activities Supplemental disclosure of noncash financing activities: Additions to property and equipment: Contributions from developers Total additions to property and equipment 2,733,296 172,268 1,836,231 15,967,379 11,818,977 4,600,080 32,386,436 17,527 $ 420,183 (399,194) (6,820) 80,532 77,793 (140,828) 252,974 16,647 1,019,415 (603,960) 19,417,417 $ 199,653 17,439 (7,813) (3,364,681) 44,439 5,867 572,960 (180,970) 9,278,139 $ 137,555 1,025 94,010 (1,304,054) 17,550 44,526 13,683 372,247 (413,621) 2,493,668 $ 757,391 18,464 (399,194) (6,820) 166,729 (4,590,942) (123,278) 341,939 36,197 1,964,622 (1,198,551) 31,189,224 $ (867,194) (30,552) 49,186 56,797 77,608 325,000 4,935 3,025 (65,779) (146,142) 1,727,785 $ 3,094,586 3,094,586 $ 864,931 864,931 $ 254,820 254,820 $ 4,214,337 4,214,337 $ - The notes to financial statements are an integral part of this statement. 42 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Fiduciary Net Position Fiduciary Funds June 30, 2020 Firemen's Pension Trust Agency Funds Assets Restricted cash and investments Accounts receivable $ - Total assets $ 51,887 167 - 52,054 - 5,378 46,676 Liabilities Medical benefits payable Dependent care benefits payable Total liabilities $ - $ - Net Position Restricted for pensions The notes to the financial statements are an integral part of this statement. 43 $ 52,054 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Changes in Fiduciary Net Position Fiduciary Fund For the Year Ended June 30, 2020 Firemen's Pension Trust Additions Investment earnings $ Total additions 777 777 Deductions Benefits 86,756 Total deductions 86,756 Change in net position (85,979) Net Position - beginning of the year 85,979 Net Position - end of the year $ The notes to the financial statements are an integral part of this statement. 44 - Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 The Town of Gilbert, Arizona (Gilbert) was incorporated on July 6, 1920, under the provisions of Article 13, Section 1 of the Constitution of the State of Arizona. Gilbert operates as a general law community, under the provisions of Title 9, Chapter 2, Article 3 (Common Council provision). Gilbert operates under the Council-Manager form of government, as empowered in Chapter 2, Article 2-51 of the Code of the Town of Gilbert, Arizona. There are seven members of the Council, elected to staggered four-year terms. The voters select the Mayor and the Council membership annually elects the Vice Mayor. Note 1 – Summary of Significant Accounting Policies Gilbert’s accounting policies conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. A. Reporting Entity Gilbert’s operations include public safety (police, fire, and animal control), parks and recreation (parks, recreation, library, culture and arts, and social services), highways and streets (street and right-of-way maintenance, traffic control, and transportation), development services (planning, code enforcement, and engineering), and general administration in support of operations. Gilbert also operates three enterprise funds to provide water, wastewater, and environmental services, and two internal service funds that provide equipment and fleet maintenance and employee self-insurance for medical and dental claims. The accompanying financial statements present the activities of Gilbert (the primary government) and its component units. Component units are legally separate entities for which Gilbert is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of Gilbert’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the combined financial statements to emphasize they are legally separate from the Town of Gilbert. Each blended and discretely presented component unit discussed below has a June 30 year-end. Blended Component Units – The Water Resources Municipal Property Corporation (Water MPC) is a legally separate, non-profit corporation which exists solely for the purpose of financing the construction or acquisition of water and wastewater capital improvement projects. The Public Facilities Municipal Property Corporation (Public Facilities MPC) is a legally separate, non-profit corporation which exists solely for the purpose of financing construction of municipal facilities. Each is considered a blended component unit because the Council appoints the five-member board of directors of each MPC, the Council must approve any amendments to the articles of incorporation of each MPC, the Council must approve any debt issues of each MPC, and each MPC provides services solely to the Town of Gilbert. At June 30, 2020, the Water MPC bonded debt is reported within the Water and Wastewater Funds and the Public Facilities MPC bonded debt is reported within the Debt Service Fund (current portion only) and within the governmental activities in the government-wide statement of net position. Discretely Presented Component Unit – The Industrial Development Authority (IDA) issues industrial revenue bonds to provide financial assistance to private sector entities for the acquisition and construction of eligible industrial and commercial facilities deemed to be in the public interest. The IDA is considered a component unit because the Council appoints the board of directors of the IDA, the Council must approve any amendments to the articles of incorporation of the IDA, and the Council must approve any debt issues of the IDA. The IDA is discretely presented in these combined financial statements because the IDA does not provide services solely to Gilbert. Separate financial statements for the IDA are prepared and presented to the IDA Board annually and can be found on Gilbert’s website. 45 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 B. Jointly Governed Organizations Phoenix-Mesa Gateway Airport Authority (PMGAA) is a non-profit corporation established and funded by the Towns of Gilbert and Queen Creek, the Cities of Mesa and Phoenix, and the Gila River Indian Community. The purpose of the entity is the development of Phoenix-Mesa Gateway Airport. The airport has three runways, a passenger terminal and is positioned to be a reliever airport to Phoenix’s Sky Harbor International Airport. The Board of Directors consists of the mayors of the respective communities and the governor of the tribal community. Gilbert contributed $350,000 in fiscal year 2020 to the PMGAA operating and capital budget. Regional Public Transportation Authority (RPTA) is a voluntary association of local governments, including Maricopa County, Chandler, Mesa, Tempe, Scottsdale, Glendale, Phoenix, and Gilbert. Its purpose is to create a regional public transportation plan for Maricopa County. The Board of Directors consists of the mayors of those municipalities and a member of the County Board of Supervisors. C. Government-wide and Fund Financial Statements The government-wide financial statements (Statement of Net Position and Statement of Activities) report on Gilbert and its component units as a whole, excluding fiduciary activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for services. The government-wide Statement of Net Position reports all financial and capital resources of the government (excluding fiduciary funds). It is displayed in a format of assets and deferred outflows of resources, less liabilities and deferred inflows of resources equals net position, with the assets and liabilities shown in order of their relative liquidity. Net position is required to be displayed in three components: 1) net investment in capital assets, 2) restricted and 3) unrestricted. Net investment in capital assets is capital assets net of accumulated depreciation, reduced by outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted net position has constraints placed on its use by either: 1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation. All net position not otherwise classified as restricted, is shown as unrestricted. The government-wide Statement of Activities demonstrates the degree to which the direct expenses of the various functions or departments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or department. Interest and fiscal charges on long-term debt are not allocated to the various functions. Program revenues include charges for services, fines and forfeitures, licenses and permit fees, special assessment fees, system development fees, intergovernmental grants and other entities participation. Taxes, investment earnings, and other revenues not identifiable with a particular function or department are included as general revenues. The general revenues support the net costs of the functions and departments not covered by program revenues. For the most part, the effect of internal activity has been removed from the government-wide financial statements. Net internal activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements. However, certain charges between the enterprise funds’ utility systems and the various functional activities are not eliminated in the government-wide statements, as this would distort the direct costs and program revenues reported for the various functions concerned. 46 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Separate financial statements are provided for the governmental funds, proprietary funds and fiduciary funds. The focus of the fund financial statements is on major funds. Major individual governmental funds and proprietary funds are reported as separate columns in the fund financial statements. Other nonmajor governmental funds, as well as the internal service funds, are summarized into a single column on the fund financial statements and are detailed in the combining statements included as supplementary information. The fiduciary funds are presented in the fund financial statements and not included in the government-wide statements. By definition these assets are being held for the benefit of a third party and cannot be used to address Gilbert’s activities or obligations. The internal service funds, which provide services to the other funds of the government, are presented in a single combined column in the proprietary fund financial statements. Because the principal users of the internal service funds are the governmental activities, the assets and liabilities of the internal service funds are consolidated into the governmental activities column of the government-wide Statement of Net Position. The costs of the internal service fund services are spread to the appropriate function or department on the government-wide Statement of Activities and the revenues and expenses within the internal service funds are eliminated from the government-wide financial statements to avoid any doubling up effect from these revenues and expenses. D. Measurement Focus and Basis of Accounting The government-wide, proprietary fund, and fiduciary fund statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the grantor or provider have been met. Governmental funds in the fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they become both measurable and available. Gilbert considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 days after year-end. Gilbert’s major revenue sources that are susceptible to accrual are property taxes, sales taxes, franchise taxes, licenses and permits, intergovernmental revenue and investment earnings associated with the current fiscal period. Charges for services, fines and forfeitures, and miscellaneous revenues are recorded as revenue when received as cash because they are generally not measurable until actually received. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgements, compensated absences, which are recognized as expenditures to the extent they are due and payable. General capital asset acquisitions are reported as expenditures in governmental funds. Issuances of general long-term debt and acquisitions under capital lease agreements are reported as other financing sources. Since the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government-wide statements’ governmental activities column, a reconciliation is presented on the page following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the fund financial statements into the governmental activities column of the government-wide presentation. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenue of Gilbert’s enterprise funds are user fees and charges to customers for water, wastewater, and environmental services. Operating expenses for these funds include the cost of supplies and repair and maintenance, administrative and payroll expenses, and depreciation. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The principal operating revenue of Gilbert’s internal service funds are charges to user departments for services provided. 47 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 E. Fund Accounting Gilbert uses funds to report its financial position and the results of its operations. Fund accounting segregates funds according to their intended purpose and is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts, which includes assets, liabilities, fund equity, revenues and expenditures/expenses. Gilbert uses the following fund categories, further divided by fund type: Governmental Funds Governmental funds are those through which most of the governmental functions are financed. The measurement focus is based upon determination of changes in financial position rather than upon net income determination. Gilbert reports the following major governmental funds: General – The General Fund is the primary operating fund and is used to account for all financial resources except those required to be accounted for in another fund. The General Fund will always be considered a major fund in the basic financial statements. Streets Special Revenue – The Streets Special Revenue Fund accounts for Gilbert’s portion of the Arizona Highway User Revenue Tax (HURF). The revenue is used exclusively for the maintenance and improvement of highways and streets. Debt Service – The Debt Service Fund accounts for the principal and interest requirements of general obligation, public facilities municipal property corporation revenue bonds, and revenue obligations not recorded in proprietary funds. Financing is provided from the levy of secondary property taxes and revenue-supported transfers. Special Assessments Debt Service – The Special Assessments Fund accounts for the principal and interest requirements of special assessment bonds not recorded in proprietary funds. Financing is provided by special assessment levies against benefited property owners. Streets and Traffic Capital Projects – The Streets and Traffic Capital Projects Fund accounts for the receipt of proceeds restricted or assigned for expenditure on street and traffic capital improvements. Proceeds recorded in this fund include general obligation bonds for street projects, roads and traffic system development fees collected from building permits, state funds in accordance with the Maricopa Association of Governments Regional Transportation Plan approved by voters as Proposition 400 in 2004, and other outside sources such as developers or other governments. Parks Capital Projects – The Parks Capital Projects Fund accounts for the receipt of parks system development fees collected from building permits paid and the expenditure of those funds for parks capital improvements. Municipal Facilities Capital Projects – The Municipal Facilities Capital Projects Fund accounts for the receipt of proceeds restricted for expenditure on municipal facilities capital improvements. Proceeds recorded in this fund include general obligation bonds for municipal projects and police, fire, and general government system development fees previously collected from building permits. 48 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Proprietary Funds Proprietary funds are used to account for Gilbert's ongoing activities which are similar to those found in the private sector, where cost-recovery and the determination of net income is useful or necessary for sound fiscal management. The measurement focus is based upon determination of net income, changes in net position, financial position and cash flows. Gilbert reports the following major proprietary funds: Water – The Water Fund accounts for the revenues and expenses from the operation and maintenance of the domestic water system. Wastewater – The Wastewater Fund accounts for the revenues and expenses from the operation of the sanitary wastewater collection and treatment and reclaimed water distribution system. Environmental Services – The Environmental Services Fund accounts for the revenues and expenses of operating the solid waste collection system and environmental compliance. Additionally, Gilbert reports the following fund types: Internal Service – The Internal Service Funds account for operations that provide services to other departments on a cost-reimbursement basis. These services include maintenance of Gilbert’s motorized equipment and self-insurance for employee benefit programs. Pension Trust – The Pension Trust Fund accounts for assets held by the government in a trustee capacity. The fund includes the assets and pension payments to retired volunteer firefighters and survivors. Agency – The Agency Funds are used to account for assets held by the government as an agent for individuals, private organizations, other governments and/or other funds. Gilbert currently maintains custodial funds to account for monies collected from employees to pay medical and dependent care claims and monies collected from sworn fire employees for providing a monthly stipend for retirees to apply to the cost of their medical and/or dental insurance, medical and dental co-pays, and prescriptions and other benefits. F. Budgetary Data In December of each year, the Office of Management & Budget (OMB) prepares a revenue estimate based upon local and state-shared revenue forecasts, historic trends, economic indicators, anticipated growth, and year-to-date revenue performance to develop guidelines for departments to follow in prioritizing budget requests. Simultaneously, departments develop operating budget requests and submit them to the OMB. Departments work with the Capital Improvement Program (CIP) Division to finalize project estimates for the CIP and submit them to the OMB for funding. Estimates for trust and agency, debt service, maintenance improvement districts, and internal service funds are prepared by respective departments and submitted to the OMB for review. In April, the Council is presented with a working budget request for preliminary review and discussion and approves a schedule of hearings and dates for adoption of the budget. A public hearing is held in May for discussion and adoption of the preliminary budget. The preliminary budget sets the maximum legal expenditure limit for the upcoming year. A second public hearing is held in June for discussion and adoption of the final budget. The Council typically adopts the final tax levy in June and reports the levy amounts to Maricopa County for collection not later than the third Monday in August. 49 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 The Council sets policy and adopts the annual budget at the fund level as a total amount of expenditures. Financial control is set by Council at the fund level, with budgetary control for operating performance administered at the departmental level. Budget adjustments for special revenue funds, excluding the Streets Special Revenue Fund, will be administered by the OMB and will not exceed the available revenues. Grants and restricted appropriations are administered by departments. Directors may authorize transfers within nonpersonnel budget lines at the same fund, department, and project level. Council action is required to approve adjustments between funds, projects, or contingency transactions over $50,000. All annual appropriations lapse at year-end and are considered for inclusion in the subsequent year’s budget on a case-by-case basis. Gilbert prepares its budget on a basis generally consistent with GAAP, with certain exceptions such as longterm liability activity, capital outlay activity, depreciation expense, and developer contributions. Budgetary comparison statements for the General Fund and major special revenue funds are presented in the basic financial statements. These statements display original budget, amended budget, and actual results. Budgetary comparison schedules are also included as supplementary schedules for the other governmental funds. G. Pooled Cash and Investments Gilbert maintains pooled cash and investment accounts for funds that are not legally required to be maintained separately. Each fund's equity in pooled cash and investments represents that fund's position in the consolidated accounts and determines that fund's allocation of interest earned in the pool. The Arizona Revised Statutes require a pooled collateral program for public deposits and regulate the investment of surplus cash. Gilbert limits its investments to the Local Government Investment Pool (managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, repurchase agreements, corporate notes, commercial paper, and money market accounts. Investments are stated at fair value based on quoted market prices. H. Inventories and Prepaid Items Inventories are recorded as assets when purchased and expensed when consumed. These inventories are valued at cost using the weighted average method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Prepaid items are recorded as expenses when consumed in the government-wide financial statements and fund financial statements. I. Capital Assets Capital assets, including public domain infrastructure (e.g., roads, bridges, sidewalks and similar assets), are defined as assets with an initial, individual cost of more than $10,000 and an estimated useful life greater than one year. All infrastructure, including infrastructure acquired prior to June 30, 1980, is reported. Capital assets are recorded at cost or estimated historical cost if purchased or constructed. Donated capital assets (including streets, water and wastewater lines installed by developers) are recorded at acquisition value. Gain or loss is recognized when assets are retired from service or otherwise disposed. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are not capitalized. Major improvements are capitalized and depreciated over the remaining useful lives of the related capital assets. 50 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets are depreciated using the straight-line method based on the following estimated useful lives (land, certain water rights, and construction-in-progress are not depreciated): Buildings Improvements Machinery and equipment Infrastructure Water Rights 10 to 50 years 15 to 80 years 3 to 15 years 3 to 80 years 80 to 100 years J. Deferred Outflows/Inflows of Resources On the government-wide and proprietary funds Statement of Net Position, deferred outflows of resources are reported and represent a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expenditure/expense) until then. Gilbert has two items that qualify for reporting in this category. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. A deferred charge on pension and other postemployment-related items results from the difference between expected and actual experience and also changes in proportion and differences between Gilbert contributions and proportionate share of contributions. These amounts are deferred and will be recognized as an expenditure/expense in future periods. On the governmental funds Balance Sheet, deferred inflows of resources are reported and represent an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds report unavailable revenues from several sources: special assessments, court fines, sales tax, grants, and other. These amounts are deferred and recognized as an inflow of resources in the period that the amount becomes available. On the government-wide and proprietary funds Statement of Net Position, deferred inflows of resources are reported on pension and other postemployment-related items for the net difference between projected and actual investment earnings on pension and other postemployment plan investments. These amounts are amortized as an expenditure/expense in future periods. K. Compensated Absences Compensated absences payable consists of vacation leave and a calculated amount of sick leave employees earned based on services already rendered. Annual leave is based on a graduated scale of years of employment and is credited to each employee as it accrues. Annual leave hours vary according to years of employment and job class, and are either taken as time off from work or paid to employees upon separation or retirement. Sick leave accumulated in excess of 520 hours (728 hours for fire personnel) is convertible annually to a partial cash benefit. Sick leave is convertible to a cash benefit upon retirement or death of the employee (at 100%) or upon resignation (at 50%) when the employee has ten or more years of service (calculated at a five-year average hourly rate). For the governmental funds, a liability for compensated absences is reported only if they have matured, for example, as a result of employee resignations and retirements. For the government-wide financial statements, as well as the proprietary fund financial statements, all of the outstanding compensated absences are recorded as a liability. 51 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 L. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as an other financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. The debt service funds are specifically established to account for and service the long-term obligations for the governmental funds and special assessment debt. Each enterprise fund individually accounts for and services the applicable bonds that benefit these funds. Long-term obligations are recognized as a liability of a governmental fund when due, or when resources have been accumulated for payment early in the following year. For other long-term obligations, only that portion expected to be financed from expendable available financial resources is reported as a fund liability of a governmental fund. M. Postemployment Benefits For purposes of measuring the net pension and other postemployment benefits (OPEB) assets and liabilities, deferred outflows of resources and deferred inflows of resources related to pensions and OPEB, and pension and OPEB expense, information about the plans’ fiduciary net position and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. N. Restricted Assets Certain bond proceeds, as well as certain resources set aside for their repayment, are classified as restricted on the Balance Sheet, or Statement of Net Position, because they are maintained separately and their use is limited by applicable debt covenants. O. Fund Balance Classifications Fund balance classifications comprise a hierarchy based primarily on the extent to which Gilbert is bound to observe constraints imposed upon the use of the resources reported in the governmental funds. Nonspendable and Restricted fund balances represent the restricted classifications and Committed, Assigned and Unassigned represent the unrestricted classifications. 52 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Nonspendable fund balance includes amounts that cannot be spent because they are either (a) not in spendable form such as inventory or (b) legally or contractually required to be maintained intact. Restricted fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed externally by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. Committed fund balance includes amounts that can only be used for specific purposes pursuant to constraints imposed internally by formal action of the Council. Formal action by Council through resolution is required to establish, modify or rescind committed fund balance. Assigned fund balance includes amounts that are limited to specific purposes by management. Per the Policies of Responsible Financial Management, Council has authorized the Finance & Management Services Director to assign fund balance amounts to a specific purpose. Unassigned fund balance represents the residual net resources in excess of the other classifications. The General Fund is the only fund that can report a positive unassigned fund balance and any other governmental fund can report a negative unassigned fund balance. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, as a general rule, restricted resources are considered spent before unrestricted. Within unrestricted, committed amounts would be reduced first, followed by assigned amounts (if available) and then unassigned amounts. P. Statement of Cash Flows A statement of cash flows classifies cash receipts and payments according to whether they stem from operating, noncapital financing, capital and related financing, or investing activities. For purposes of the statement of cash flows, all highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased are considered cash equivalents. Q. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make a number of estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Statement of Net Position/Balance Sheet and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. R. Transactions Between Funds Transactions that would be recorded as revenues and expenditures/expenses if they involved entities external to the governmental unit are recorded as revenues and expenditures/expenses in the respective funds. Transactions constituting a reimbursement of a fund for expenditures/expenses originally recorded in that fund, but properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund, and as reductions of the expenditures/expenses in the fund which is reimbursed, excluding indirect administrative costs which are recorded as revenues and expenditures/expenses in the related funds. Indirect administrative expenses represent overhead costs which have been allocated to the enterprise funds based upon a formula approved with the budget. All other interfund transactions are reported as transfers. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the governmentwide financial statements as “internal balances”. 53 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in the applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. See Note 4 for further discussion of the interfund receivables/payables at June 30. S. Property Tax Gilbert's property tax levy is adopted by the Council each year and the County levies the taxes on or before the third Monday of August, based on the previous year's limited property value as of the lien date (January 1). Maricopa County, at no charge, levies and collects all property taxes. Levies are due and payable in two installments, on September 1 and March 1, and become delinquent on November 1 and May 1, respectively. Public auctions of properties that have delinquent real estate taxes are held in February following the May 1 delinquency of the second installment. The purchaser is given a certificate of purchase, issued by the County Treasurer. Five years from the date of sale, the holder of a certificate of purchase, which has not been redeemed, may demand of the County Treasurer, a County Treasurer's Deed. Gilbert does not levy property taxes for general operations (primary tax). Secondary property taxes are levied solely for the purpose of retiring the principal, interest, and servicing fees on voter approved general obligation bonded indebtedness. State law requires municipalities to adopt a property tax levy based on the amount of scheduled and projected debt service for the year plus a reasonable amount for delinquencies and certain costs. For fiscal year 2020, Gilbert’s property tax rate is $0.99 per $100 of secondary assessed valuation. Note 2 – Deposits and Investments The Arizona Revised Statutes require a pooled collateral program for public deposits and a Statewide Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of the pooled collateral program is to ensure that governmental entities’ public deposits placed in participating depositories are secured with collateral of 102% of the public deposits, less any applicable deposit insurance. An eligible depository may not retain or accept any public deposit unless it has deposited the required collateral with a qualified escrow agent or the Administrator. The Administrator manages the pooled collateral program, including reporting on each depository’s compliance with the program. The investment of public monies is also regulated by the Arizona Revised Statutes Title 35. Gilbert limits its investments to the Local Government Investment Pools 7 and 700 (that only invest in U.S. government securities and managed by the Arizona State Treasurer), U.S. government securities, certificates of deposit, bonds, commercial paper, corporate notes and money market accounts. The State Board of Investment provides oversight for the State Treasurer’s pools. The fair value of a participant’s position in the pool approximates the value of that participant’s pool shares, and the participant’s shares are not identified with specific investments. Participants in the pool are not required to categorize the value of shares in accordance with the fair value hierarchy. Gilbert categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Investments categorized as Level 1 are valued using prices quoted in active markets for those investments. Investments categorized as Level 2 are valued based on significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs. Gilbert had total investments of $589,597,843 at June 30, 2020. Gilbert categorizes certain investments within the fair value hierarchy established by generally accepted accounting principles as follows: 54 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Investment Type U.S. Government Treasuries U.S. Government Agencies Corporate Notes Certificates of Deposit Asset Backed Securities Municipal Bonds Money Market - U.S. Treasuries Total Investments Categorized by Fair Value Level Amount $ 200,634,060 154,012,498 70,309,644 45,896,014 5,730,384 2,937,281 30,771,396 $ 510,291,277 External Investment Pools Measured at Fair Value State Treasurer's Investment Pool Total Investments Measured at Fair Value 79,306,566 $ 589,597,843 Fair Value Measurement Using Level 1 Level 2 $ 200,634,060 $ 154,012,498 70,309,644 45,896,014 5,730,384 2,937,281 30,771,396 $ 200,634,060 $ 309,657,217 Interest rate risk – Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As a means of limiting its exposure to fair value losses arising from rising interest rates, Gilbert’s investment policy limits its investment portfolio to maturities of five years or less. At June 30, 2020, Gilbert’s investment maturities were as follows: Investment Type U.S. Government Treasuries U.S. Government Agencies Corporate Notes Certificates of Deposit Asset Backed Securities Municipal Bonds State Treasurer's Investment Pool Money Market - U.S. Treasuries Total Fair Value $ 200,634,060 154,012,498 70,309,644 45,896,014 5,730,384 2,937,281 79,306,566 30,771,396 $ 589,597,843 Investment Maturities (in Years) Less than 1 1-3 $ 10,480,463 $ 190,153,597 24,181,111 129,831,387 33,007,494 37,302,150 38,011,414 7,884,600 5,730,384 2,937,281 52,907,380 26,399,186 30,771,396 $ 189,359,258 $ 400,238,585 Credit risk – Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. Gilbert addresses credit risk through its investment policy by restricting the allowable investment instruments. As of June 30, 2020, the investments in the U.S. Government Agencies were rated AA+ and the investments in Corporate Notes ranged from BBB+ ratings to AAA ratings. Gilbert’s investment in the State Treasurer’s Investment Pool did not receive a credit quality rating from a national rating agency. Custodial credit risk – deposits – Custodial credit risk is the risk that in the event of a bank failure, Gilbert’s deposits may not be returned. As of June 30, 2020, Gilbert’s bank balance was $11,909,925, of which $11,908,659 was with JP Morgan and $1,266 was held with Alliance Bank. $11,658,659 of JP Morgan’s bank balance was exposed to custodial credit risk. JP Morgan’s balance was uninsured but collateralized with securities held by the pledging financial institution’s trustee. These securities are not in Gilbert’s name, but cannot be released without Gilbert’s authorization. At the end of each day, a portion of Gilbert’s bank balance is transferred to a sweep investment account. 55 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Custodial credit risk – investments – The custodial credit risk for investments is the risk that, in the event of the failures of the counterparty (e.g. broker-dealer) to a transaction, Gilbert will not be able to recover the value of its investment or collateral securities that are in the possession of another party. Gilbert’s investment policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by Gilbert be conducted on a delivery-versus-payment basis. Securities are to be held by a third-party custodian. Gilbert’s investment in the State Treasurer’s Investment Pool represents a proportionate interest in the Pool’s portfolio; however, Gilbert’s portion is not identified with specific investments and is not subject to custodial credit risk. Concentration of credit risk – Gilbert’s investment policy limits corporate notes to 20% of total funds and 3% per issuer. As of June 30, 2020, of Gilbert’s investments, 40% were in U.S. Government Treasuries, 26% were in U.S. Government Agencies, 12% were in Corporate Notes, 8% were in Certificates of Deposit, 1% were in Asset Backed Securities and 13% were in the State Treasurer’s Investment Pool. Reconciliation of pooled cash and investments as reported on the statement of net position: Primary government: Carrying amount of cash Carrying amount of deposits/investments Total cash and investments Pooled cash and investments Restricted cash and investments Total cash and investments (per Statement of Net Position) Fiduciary funds Total cash and investments $ 4,419,978 589,597,843 $ 594,017,821 $ 556,349,876 37,616,058 593,965,934 51,887 $ 594,017,821 Note 3 – Taxes Receivable and Due from Other Governments The General Fund taxes receivable amount at June 30, 2020, includes $1,399,807 in state shared sales tax and $12,158,481 in local sales tax. Amounts reported as due from other governments, significant to each governmental fund, at June 30, 2020 are summarized as follows: General Fund CARES Act Funds Vehicle License Tax Regional Public Transportation Authority - Roads and Maintenance $ 22,974,647 504,869 375,092 Streets Special Revenue Fund Highway User Revenue Funds (HURF) 1,282,110 Nonmajor Funds Maricopa County Attorney's Office - Racketeer Influenced Corrupt Organization Funds U.S. Dept. of Housing and Urban Development U.S. Dept. of Homeland Security Regional Public Transportation Authority - Local State of Arizona - COVID-19 Relief Funds 1,759,079 753,998 102,637 208,451 198,286 56 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Amounts reported as due from other governments, significant to each proprietary fund, at June 30, 2020 are summarized as follows: Water Fund City of Chandler - Joint Operation of SanTan Vista Water Treatment Plant $ 345,504 Note 4 – Interfund Receivables and Payables The composition of interfund balances as of June 30, 2020, is shown below. Due to/from other funds are short-term loans that cover cash deficits and are recorded in the following funds (cash deficits are temporary, until reimbursements are received): Due To Due From General $ $ 970,733 Other Governmental Funds 970,733 Total $ 970,733 $ 970,733 Advances to/from other funds are long-term loans that cover cash deficits for capital expenditures and are recorded in the following funds: Advances To Advances From General $ 13,281,380 $ Municipal Facilities Capital Projects 13,281,380 Total $ 13,281,380 $ 13,281,380 Note 5 – Capital Assets A summary of changes in capital assets for governmental activities, for the fiscal year ended June 30, 2020, is as follows: July 1, 2019 Additions Deletions June 30, 2020 Non-depreciable assets: Land $ 184,321,561 $ 4,019,281 $ (41,958,194) $ 146,382,648 Construction-in-progress 88,219,026 121,242,153 (11,755,356) 197,705,823 Total non-depreciable assets 272,540,587 125,261,434 (53,713,550) 344,088,471 Depreciable assets: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total depreciable assets Less accumulated depreciation: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total depreciable assets, net Governmental activities capital assets, net 272,890,522 76,086,081 73,498,894 1,104,138,883 1,526,614,380 516,747 1,780,865 16,948,905 19,246,517 (761,019) (2,663,156) (3,424,175) 273,407,269 75,325,062 72,616,603 1,121,087,788 1,542,436,722 (125,195,286) (51,667,848) (51,401,908) (564,491,618) (792,756,660) 733,857,720 (10,633,940) (3,013,120) (3,885,994) (36,878,706) (54,411,760) (35,165,243) 336,475 2,596,934 2,933,409 (490,766) (135,829,226) (54,344,493) (52,690,968) (601,370,324) (844,235,011) 698,201,711 $ 1,006,398,307 $ 90,096,191 $ (54,204,316) $ 1,042,290,182 57 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Depreciation expense was charged to governmental functions in the government-wide financial statement as follows: Management and policy Finance and management services Legal and court Development services Police Fire Highways and streets Parks and recreation Total depreciation expense not including internal service funds Capital assets held by Gilbert's internal service funds are charged to the various functions based on their usage of the assets Total depreciation expense - governmental activities $ 706,470 389,159 459,768 2,362,543 2,569,015 3,455,542 38,137,350 6,314,386 $ 54,394,233 17,527 $ 54,411,760 A summary of changes in capital assets for business-type activities, for the fiscal year ended June 30, 2020, is as follows: July 1, 2019 Non-depreciable assets: Land Water rights Construction-in-progress Total non-depreciable assets $ Depreciable assets: Plant and equipment Infrastructure Water rights Total depreciable assets Less accumulated depreciation: Plant and equipment Infrastructure Water rights Total accumulated depreciation Total depreciable assets, net Business-type activities capital assets, net $ 23,510,621 57,129,947 41,210,231 121,850,799 Additions $ 1,020,204 28,737,810 29,758,014 $ Deletions June 30, 2020 (300) (24,288,269) (24,288,569) $ 23,510,321 58,150,151 45,659,772 127,320,244 149,384,852 600,831,434 40,354,519 790,570,805 1,925,653 28,550,304 30,475,957 (3,275,337) (3,275,337) 148,035,168 629,381,738 40,354,519 817,771,425 (80,142,106) (230,515,393) (2,308,225) (312,965,724) 477,605,081 (7,557,724) (15,854,616) (410,428) (23,822,768) 6,653,189 3,263,486 3,263,486 (11,851) (84,436,344) (246,370,009) (2,718,653) (333,525,006) 484,246,419 599,455,880 $ 36,411,203 $ (24,300,420) 58 $ 611,566,663 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Note 6 – Construction-in-Progress and Commitments Governmental activities construction-in-progress and related construction commitments at June 30, 2020, were as follows: Streets and traffic Parks Municipal facilities Redevelopment Fleet Total Constructionin-Progress $ 50,325,948 62,134,134 59,953,339 25,287,496 4,906 $ 197,705,823 Commitments $ 37,065,996 7,868,499 22,463,180 680,518 $ 68,078,193 Business-type activities construction-in-progress and related construction commitments at June 30, 2020, were as follows: Constructionin-Progress $ 21,309,238 23,883,012 467,522 $ 45,659,772 Water system Wastewater system Environmental services Total Commitments $ 14,910,454 10,542,740 $ 25,453,194 Note 7 – Long-Term Debt General Obligation Bonds Gilbert issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities including street improvements and the Public Safety Training Facility. General obligation bonds have been issued for both governmental and business-type activities. Currently, there are no outstanding general obligation bonds for business-type activities. General obligation bonds are direct obligations and pledge the full faith and credit of Gilbert. General obligation bonds outstanding at June 30, 2020, were as follows: Governmental 2017 General Obligation and General Obligation Refunding Bonds, Series 2017, 3.0% to 5.0%, original amount $121,670,000, annual retirements due July 1, 2017, through July 1, 2036 $ 2020 General Obligation and General Obligation Refunding Bonds, Series 2020, 2.0% to 4.0%, original amount $76,750,000, annual retirements due July 1, 2020, through July 1, 2039 Total 74,860,000 $ 59 76,965,000 151,825,000 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Annual debt service requirements to maturity for general obligation bonds are as follows: Year Ending 2021 2022 2023 2024 2025 2026-2030 2031-2035 2036 Governmental Activities Principal Interest 19,995,000 5,891,688 22,275,000 4,908,338 18,530,000 3,855,538 4,170,000 3,114,338 4,360,000 2,922,688 24,830,000 11,597,438 30,225,000 6,195,138 27,440,000 1,706,994 $ 151,825,000 $ 40,192,160 Under the provisions of the Arizona Constitution, outstanding general obligation bonded debt for combined water, wastewater, electric, parks and open space, streets, and public safety purposes may not exceed 20% of Gilbert's net full cash (NFC) valuation, nor may outstanding general obligation bonded debt for all other purposes exceed 6% of Gilbert's NFC valuation. The following is a summary of legal borrowing capacity at June 30, 2020: Water, Wastewater, Electric, Streets, Fire, Police, and Parks and Open Space Special Purpose Bonds NFC - Assessed Valuation $ 3,114,101,831 All Other General Obligation Bonds NFC - Assessed Valuation 20% constitutional limit Less general obligation bonds outstanding Less premium adjustment Available 20% limitation borrowing capacity 6% constitutional limit Less general obligation bonds outstanding Less premium adjustment Available 6% limitation borrowing capacity $ 622,820,366 (151,825,000) (11,071,074) $ 459,924,292 $ 3,114,101,831 $ 186,846,110 - $ 186,846,110 Special Assessment Bonds with Governmental Commitment As trustee for the improvement districts, Gilbert is responsible for collection of assessments levied against the owners of property within the improvement districts and for disbursement of these amounts for retirement of the respective bonds issued to finance the improvements. At June 30, 2020, the special assessments receivable, together with amounts paid in advance and interest to be received over the life of the assessment period, were adequate for the scheduled maturities of the bonds payable and the related interest. Special assessment bonds are collateralized by properties within the districts. In the event of default by the owner, Gilbert may enforce an auction sale to satisfy the debt service requirements of the improvement bonds. Gilbert is contingently liable on special assessment bonds to the extent that proceeds from auction sales are insufficient to retire outstanding bonds. 60 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Special assessment bonds outstanding at June 30, 2020, were as follows: Governmental 2002 Improvement District #19 Bonds, 5.2%, original amount $6,510,000, annual retirements due January 1, 2005, through January 1, 2027 $ 2009 Improvement District #20 Bonds, 5.1%, original amount $8,675,000, annual retirements due January 1, 2012, through January 1, 2029 Total 75,000 4,435,000 $ 4,510,000 Annual debt service requirements to maturity for special assessment bonds are as follows: Year Ending 2021 2022 2023 2024 2025 2026-2029 Governmental Activities Principal Interest 410,000 219,625 435,000 198,067 450,000 175,490 475,000 151,893 495,000 127,145 2,245,000 233,472 $ 4,510,000 $ 1,105,692 Municipal Property Corporation (MPC) Revenue Bonds The Public Facilities MPC exists solely for the purpose of financing the cost of acquisition of certain interests in real property for public safety and parks and recreation facilities, the cost of design and construction of Fire and Rescue Station #9 (the 2017 issue); and the refunding of certain maturities of outstanding bonds (the 2011, 2014, and 2017 issues). The Water MPC exists solely for the purpose of financing the construction of water and wastewater capital improvement projects. Also see Note 17 regarding Pledged Revenues. Municipal property corporation revenue bonds outstanding at June 30, 2020, were as follows: 61 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 2011 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 3.0% to 4.75%, original amount $20,980,000, annual retirements due July 1, 2013 through July 1, 2021 Governmental Business-Type $ $ 5,395,000 - 2014 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 2.0% to 5.0%, original amount $28,080,000, annual retirements due July 1, 2016 through July 1, 2021 11,750,000 - 2017 Public Facilities Municipal Property Corporation Revenue Refunding Bonds, 3.0% to 5.0%, original amount $43,075,000, annual retirements due July 1, 2018 through July 1, 2027 34,165,000 - 2017 Public Facilities Municipal Property Corporation Revenue Bonds, 4.0% to 5.0%, original amount $6,450,000, annual retirements due July 1, 2022 through July 1, 2027 6,450,000 - 2016 Water Resources Municipal Property Corporation, Senior Lien Utility System Revenue and Revenue Refunding Bonds, 2.25% to 5.0%, original amount $115,940,000, annual retirements due July 1, 2017 through July 1, 2036 - 100,770,000 2018 Water Resources Municipal Property Corporation, Senior Lien Utility System Revenue Bonds, 3.0% to 5.0%, original amount $37,460,000 annual retirements due July 1, 2018 through July 1, 2031 - 32,095,000 $ Total 57,760,000 $ 132,865,000 Annual debt service requirements to maturity for MPC revenue bonds are as follows: Year Ending 2021 2022 2023 2024 2025 2026-2030 2031-2035 2036 Governmental Activities Principal Interest 12,805,000 2,659,788 14,590,000 1,991,212 5,500,000 1,508,250 5,770,000 1,243,250 6,055,000 954,750 13,040,000 986,000 $ 57,760,000 $ 9,343,250 62 Business-type Activities Principal Interest 7,560,000 5,676,312 7,950,000 5,288,563 8,340,000 4,881,313 8,780,000 4,453,313 9,200,000 4,003,812 52,935,000 13,157,918 31,330,000 3,574,975 6,770,000 273,400 $ 132,865,000 $ 41,309,606 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 University Revenue Obligations The University Revenue Obligations were issued specifically for the purpose of providing funds to design and construct a four-story building to be utilized for educational purposes. These obligations are payable solely from the revenues generated by excise taxes and state-shared revenue. Subordinate lien pledged revenue obligations outstanding at June 30, 2020, were as follows: Governmental Subordinate Lien Pledged Revenue Obligations, Series 2015, 3.0% to 5.0% original amount $36,980,000, annual retirements due July 1, 2017 through July 1, 2045 $ 34,955,000 Annual debt service requirements to maturity for subordinate lien pledged revenue obligations are as follows: Year Ending 2021 2022 2023 2024 2025 2026-2030 2031-2035 2036-2040 2041-2045 2046 Governmental Activities Principal Interest 735,000 1,506,081 770,000 1,468,456 810,000 1,428,957 850,000 1,387,456 895,000 1,343,831 5,180,000 5,985,281 6,390,000 4,786,878 7,630,000 3,521,641 9,495,000 1,774,472 2,200,000 55,000 $ 34,955,000 $ 23,258,053 63 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2020, was as follows: Balance July 1, 2019 Governmental activities: Bonds payable: General obligation bonds Special assessment bonds with government commitment Revenue bonds Revenue obligations Unamortized bond premium Total bonds payable Compensated absences Other postemployment benefits Net pension liability Total long-term liabilities Business-type activities: Bonds payable: Revenue bonds Unamortized bond premium Total bonds payable Compensated absences Other postemployment benefits Net pension liability Total long-term liabilities Additions Reductions Balance June 30, 2020 110,445,000 $ 76,750,000 $ (35,370,000) $ 4,895,000 73,560,000 35,655,000 22,526,112 247,081,112 15,347,440 740,938 115,155,993 5,577,433 82,327,433 8,757,164 8,779,938 (385,000) (15,800,000) (700,000) (2,683,183) (54,938,183) (7,775,234) (107,546) - $ 378,325,483 $ 99,864,535 $ (62,820,963) $ 415,369,055 $ 39,449,294 $ 140,090,000 20,412,481 160,502,481 2,406,245 155,154 18,764,273 $ 1,717,227 1,964,622 $ (7,225,000) (1,534,730) (8,759,730) (1,538,086) (13,309) - $ 132,865,000 18,877,751 151,742,751 2,585,386 141,845 20,728,895 $ 7,560,000 7,560,000 885,801 - $ 181,828,153 $ 3,681,849 $ (10,311,125) $ 175,198,877 $ 8,445,801 $ 151,825,000 Due Within One Year $ 4,510,000 57,760,000 34,955,000 25,420,362 274,470,362 16,329,370 633,392 123,935,931 19,995,000 410,000 12,805,000 735,000 33,945,000 5,504,294 - Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. At year-end, $204,568 of internal service funds compensated absences, $1,979,214 net pension liability, and $13,202 of other post-employment benefits liability are included in the above amounts. Long-term compensated absences, other postemployment benefits, and the net pension liability of governmental activities are expected to be liquidated by the operating funds (primarily the General Fund and the Streets Special Revenue Fund) as they come due. Gilbert does not have any outstanding notes from direct borrowings or direct placements, no assets pledged as collateral for debt, nor any outstanding lines of credit. 64 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Note 8 – Refunding Bonds On May 26, 2020, Gilbert issued $15,020,000 of refunding bonds with a net premium of $1,438,165 to current refund $16,000,000 of outstanding Series 2008 General Obligation Bonds. In addition, Gilbert issued $61,730,000 of general obligation bonds with a net premium of $4,139,268 to provide funds for Gilbert’s Public Safety Training Facility. See Note 7 for additional detail on the general obligation bonds issued. The Series 2020 General Obligation Refunding Bonds were issued with an average interest rate of 4.0%. Gilbert realized net proceeds of $16,362,889 after payment of $95,276 for underwriting fees. These proceeds were provided to Gilbert to pay issuance costs of approximately $109,458 with the remaining $16,252,000 used to pay all future debt service payments of the Series 2008 refunded bonds. As a result, the refunded bonds are considered to be defeased and the liability for those bonds has been removed. The purpose of the refunding was to take advantage of lower interest rates, thereby reducing future debt service payments. The refunding will reduce debt service payments by $799,189 over the next four years, producing an economic gain (difference between present value of old and new debt service payments) of $779,007. Note 9 – Risk Management Traditional Commercial Insurance Programs Gilbert operates with traditional commercial insurance programs against major losses in property, plant, equipment, and liability. Administrative responsibility for the safety program and education and risk management resides with the Office of the Town Attorney. Insurance is procured on a competitive quotation basis, using the services of an independent broker as a consultant. Gilbert processes all claims and evaluates their validity to determine if insurance reporting is warranted, or if the claim can be resolved administratively. Claims settled administratively, which are generally less than the deductibles of the appropriate policy, are paid from the funds where the claims occurred. During fiscal year 2020, there was no reduction in insurance coverage from prior years. Additionally, settlements have not exceeded insurance coverage during any of the last three fiscal years. Effective July 1, 2020, Gilbert became self-insured for worker’s compensation. Gilbert obtained approval for self-insured status from the Industrial Commission of Arizona and began using a third-party administrator to process claims. The Health Trust Board, which oversees the employee benefit self-insurance trust, began overseeing the worker’s compensation self-insurance fund. Self-Insurance Gilbert has established an Employee Benefit Self-Insurance Trust (Trust) to account for and finance its uninsured risks of loss for medical claims. The Trust is overseen by the Health Trust Board. All Trust activity is recorded in the Employee Benefit Self-Insurance Fund. Gilbert purchases commercial stop loss insurance to limit the claims liability to the Trust. The stop loss insurance provides reimbursement to the Trust for medical claims incurred by an individual member in excess of $250,000 after an additional $150,000 aggregate plan risk retention. Premiums are paid into the Employee Benefit Self-Insurance Fund by all other funds and are available to pay claims and administrative costs of the program and fund claim reserves. As with any risk retention program, Gilbert is contingently liable with respect to claims beyond those actuarially projected. The claims liability of $2,025,000 reported in the employee benefit self-insurance trust at June 30, 2020, is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability be reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). The Trust includes medical and dental benefits. For fiscal year 2020, an increase of $342,000 and decrease of $17,000 were recorded for IBNR claims under the medical and dental plans, respectively. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts and other economic and social factors. Fiscal year 2020 reflected an increase in claims costs of $4,686,928 from fiscal year 2019. This was due to an increase of $4,745,002 in medical claims and a decrease of $58,074 in dental claims. 65 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Changes in the fund’s claim liability amount in fiscal years 2020 and 2019 were: Fiscal Year Claim Liability Claims and Year Ended, at Beginning of Changes Fiscal Year at End of June 30 Fiscal Year in Estimates Claim Payments Fiscal Year 2020 $ 2019 1,700,000 1,514,000 $ 19,966,277 15,279,349 Claim Liability $ (19,641,277) $ 2,025,000 (15,093,349) 1,700,000 Note 10 – Pensions and Other Postemployment Benefits Gilbert contributes to the following pension and OPEB plans:       Elected Officials Retirement Plan (EORP) Pension Arizona State Retirement System (ASRS) Pension ASRS Health Insurance Premium Supplement (OPEB) ASRS Long-Term Disability (OPEB) Public Safety Retirement System (PSPRS) Pension PSPRS Health Insurance Premium Benefit (OPEB) Gilbert also provides post-employment medical care, prescription drug, and dental care for retired employees through a single-employer defined benefit medical and dental plan. The ASRS, PSPRS, and EORP OPEB plan information is not disclosed in detail in this note due to their relative insignificance to the financial statements. See Note 11 for information on Gilbert’s OPEB plan. The ASRS and PSPRS plans are component units of the State of Arizona. Pension and OPEB Statement of Net Position and Statement of Activities Deferred Outflow of Resources: OPEB - Town Pension - ASRS Pension - PSPRS Pension - EORP Total Liabilities: OPEB - Town Pension - ASRS Pension - PSPRS Pension - EORP Total Deferred Inflow of Resources: OPEB - Town Pension - ASRS Pension - PSPRS Pension - EORP Total Governmental Activities Business-Type Activities $ 713,664 7,612,599 46,734,588 189,698 $ 55,250,549 $ 633,392 54,964,802 67,436,024 1,535,105 $ 124,569,323 141,845 20,728,895 $ 20,870,740 775,237 75,693,697 67,436,024 1,535,105 $ 145,440,063 1,541,816 3,434,558 4,310,023 664,677 9,951,074 345,281 1,295,277 1,640,558 1,887,097 4,729,835 4,310,023 664,677 $ 11,591,632 $ 66 $ $ 159,821 2,908,544 3,068,365 Total $ 873,485 10,521,143 46,734,588 189,698 $ 58,318,914 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Gilbert reported $33,487,416 of pension and OPEB contributions as expenditures in the governmental funds related to all pension plans to which it contributed for fiscal year 2020. A. Arizona State Retirement System Plan Description – Gilbert employees not covered by the other pension plans described below participate in the ASRS. The ASRS administers a cost-sharing multiple-employer defined benefit pension plan, a costsharing multiple-employer defined benefit health insurance premium supplement (OPEB) plan, and a costsharing multiple-employer defined benefit long-term disability (OPEB) plan. The ASRS is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Articles 2 and 2.1. The ASRS issues a publicly available financial report that includes financial statements and required supplementary information. This report is available on their website at www.azasrs.gov. Benefits Provided – The ASRS provides retirement, health insurance premium supplement, long-term disability, and survivor benefits. State statute establishes benefit terms. Retirement benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: Years of service and age required to receive benefit Final average salary based on Benefit percent per year of service Retirem ent Initial Mem bership Date: Before July 1, 2011 On or After July 1, 2011 Sum of years and age equals 80 30 years, age 55 10 years, age 62 25 years, age 60 5 years, age 50* 10 years, age 62 Any years, age 65 5 years, age 50* Any years, age 65 Highest 36 consecutive months of last 120 months Highest 60 consecutive months of last 120 months 2.1% to 2.3% 2.1% to 2.3% * With actuarially reduced benefits. Retirement benefits for members who joined the ASRS prior to September 13, 2013, are subject to automatic cost-of-living adjustments based on excess investment earnings. Members with a membership date on or after September 13, 2013, are not eligible for cost-of-living adjustments. Survivor benefits are payable upon a member’s death. For retired members, the retirement benefit option chosen determines the survivor benefit. For all other members, the beneficiary is entitled to the member’s account balance that includes the member’s contributions and employer’s contributions, plus interest earned. Contributions – In accordance with state statutes, annual actuarial valuations determine active member and employer contribution requirements. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. For the year ended June 30, 2020, statute required active ASRS members to contribute at the actuarially determined rate of 12.11% (11.94% for retirement and 0.17% for long term disability) of the members’ annual covered payroll, and statute required Gilbert to contribute at the actuarially determined rate of 12.11% (11.45% for retirement, 0.49% for health insurance premium benefit, and 0.17% for long-term disability) of the members’ annual covered payroll. In addition, Gilbert was required by statute to contribute at the actuarially determined rate of 10.41% (10.29% for retirement, 0.05% for health insurance premium benefit, and 0.07% for long-term disability) of annual covered payroll of retired members who worked for Gilbert in positions that an employee who contributes to the ASRS would typically fill. 67 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 During fiscal year 2020, Gilbert paid for ASRS pension contributions as follows: 61% from the general fund, 35% from major funds, and 4% from other funds. The contributions to the pension plan for fiscal year 2020 were $6,355,725. Pension Liability – At June 30, 2020, Gilbert reported a liability of $75,693,697 for its proportionate share of the ASRS’ net pension liability. The net pension liability was measured as of June 30, 2019. The total pension liability used to calculate the net pension liability was determined using updated procedures to roll forward the total pension liability from an actuarial valuation as of June 30, 2018, to the measurement date of June 30, 2019. The total pension liability as of June 30, 2019 reflects changes in actuarial assumptions based on the results of an actuarial experience study for the 5-year period ended June 30, 2016, including decreasing the discount rate from 8.0% to 7.5%, changing the projected salary increased from 3.0-6.75% to 2.7-7.2%, decreasing the inflation rate from 3.0% to 2.3%, and changing the mortality rates. Gilbert’s proportion of the net pension liability was based on Gilbert’s actual contributions to the plan relative to the total of all participating employers’ contributions for the year ended June 30, 2019. Gilbert’s proportion measured as of June 30, 2019, was 0.52019%, which was an increase of 0.02283% from its proportion measured as of June 30, 2018. Gilbert’s reported liability at June 30, 2020, increased by $6,329,480 from the prior year liability of $69,364,217 because of changes in the ASRS’ net pension liability and Gilbert’s proportionate share of that liability. The ASRS’ publicly available financial report provides details on the change in the net pension liability. The allocation of pension liability to the funds is based on employer contributions for the fiscal year. Pension Expense and Deferred Outflows/Inflows of Resources – For the year ended June 30, 2020, Gilbert recognized pension expense for ASRS of $9,112,277. At June 30, 2020, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Differences between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between Gilbert contributions and proportionate share of contributions Gilbert contributions subsequent to the measurement date Total $ 1,367,427 319,960 Deferred Inflows of Resources $ - $ 2,478,031 6,355,725 10,521,143 14,231 3,014,271 1,701,333 $ 4,729,835 The $6,355,725 reported as deferred outflows of resources related to ASRS pensions resulting from Gilbert’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to ASRS pensions will be recognized in pension expense as follows: 68 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Year Ending June 30 2021 2022 2023 2024 2025 Thereafter $ Amount 274,515 (967,867) (326,728) 455,663 - Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial rollforward date Actuarial cost method Investment rate of return Projected salary increases Inflation Permanent benefit increase Mortality rates June 30, 2018 June 30, 2019 Entry age normal 7.5% 2.7% - 7.2% 2.3% Included 2017 SRA Scale U-MP Actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. The long-term expected rate of return on ASRS pension plan investments was determined to be 7.5% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Equity Credit Interest rate sensitive bonds Real estate Target Allocation 50% 20% 10% 20% 100% Long-Term Expected Geometric Real Rate of Return 6.09% 5.36% 1.62% 5.85% Discount Rate – At June 30, 2019, the discount rate used to measure the ASRS total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers will be made based on the actuarially determined rates based on the ASRS Board’s funding policy, which establishes the contractually required rate under Arizona statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 69 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Sensitivity of Gilbert’s Proportionate Share of the ASRS Net Pension Liability to Changes in the Discount Rate – The following presents Gilbert’s proportionate share of the net pension liability calculated using the discount rate of 7.5%, as well as what Gilbert’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1 percentage point higher (8.5%) than the current rate: 1% Decrease (6.5%) Gilbert's proportionate share of the net pension liability $ 107,729,644 Current Discount Rate (7.5%) $ 75,693,697 1% Increase (8.5%) $ 48,919,874 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued ASRS financial report. The report is available on the ASRS website at www.azasrs.gov. B. Public Safety Personnel Retirement System Plan Description – The PSPRS administers agent and cost-sharing multiple-employer defined benefit pension plans and agent multiple-employer defined benefit health insurance premium benefit (OPEB) plans. Gilbert public safety employees who are regularly assigned hazardous duty participate in the PSPRS or employees who became members on or after July 1, 2017, may participate in the Public Safety Personnel Defined Contribution Retirement Plan (PSPDCRP). A nine-member board known as the Board of Trustees and the participating local boards govern the PSPRS according to the provisions of A.R.S. Title 38, Chapter 5, Article 4. Employees who became PSPRS members on or after July 1, 2017, participate in the cost-sharing plans (PSPRS Tier 3 Risk Pool) which are not further disclosed because of their relative insignificance to Gilbert’s financial statements. The PSPRS issues a publicly available financial report that includes financial statements and required supplementary information. This report is available on their website at www.psprs.com. Benefits Provided – The PSPRS provides retirement, health insurance premium supplement, disability, and survivor benefits. State statute establishes benefits terms. Retirement and disability benefits are calculated on the basis of age, average monthly compensation, and service credit as follows: 70 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Retirement and survivor benefits are subject to automatic cost-of-living adjustments based on inflation. PSPRS also provides temporary disability benefits of 50% of the member’s compensation for up to 12 months. Employees Covered by Benefit Terms – At June 30, 2020, the following employees were covered by the agent pension plan’s benefit terms: Police Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total 75 55 197 327 Fire 21 17 165 203 Contributions and Annual OPEB Cost – State statutes establish the pension contribution requirements for active PSPRS employees. In accordance with state statutes, annual actuarial valuations determine employer contribution requirements for PSPRS pension and health insurance premium benefits. The combined active member and employer contribution rates are expected to finance the costs of benefits employees earn during the year, with an additional amount to finance any unfunded accrued liability. Contribution rates for the year ended June 30, 2020 are indicated below. Rates are a percentage of active members’ annual covered payroll. 71 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Active MemberPension Police PSPRS Tier 1 PSPRS Tier 2 PSPRS Tier 3 Defined benefit only PSPRS Tier 3 Defined contribution only Fire PSPRS Tier 1 PSPRS Tier 2 PSPRS Tier 3 Defined benefit only PSPRS Tier 3 Defined contribution only Active MemberHealth 7.65% 11.65% 9.80% 0.21% GilbertPension GilbertHealth 31.43% 31.43% 0.31% 0.31% 26.06% 0.21% 10.51% 26.84% 7.65% 11.65% 22.14% 22.14% 0.31% 0.31% 16.48% 0.21% 9.80% 0.21% 10.51% 17.26% In addition, the statute required Gilbert to contribute at the actuarially determined rate indicated above for employees participating in the PSPRS Tier 3 Risk Pool and PSPDCRP members in addition to Gilbert’s required contributions to the PSPRS Tier 3 Risk Pool and PSPDCRP. For the agent plans, actual contributions made to the pension plan for the year ended June 30, 2020 exceeded the annual pension cost due to prepayments and an additional payment made towards the unfunded liability (100% from the General Fund): Police Pension contributions made $ 20,376,341 Fire $ 6,652,405 Pension Liability – At June 30, 2020, Gilbert reported $67,436,024 in net pension liability. The net pension liabilities were measured as of June 30, 2019, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total liability as of June 30, 2019, reflects changes in actuarial assumptions to decrease the investment rate of return from 7.4% to 7.3% and update the mortality rates. Actuarial Assumptions – The significant actuarial assumptions used to measure the total pension liability are as follows: Actuarial valuation date Actuarial cost method Investment rate of return Wage inflation Price inflation Cost-of-living adjustment Mortality rates June 30, 2019 Entry age normal 7.3% 3.5% 2.5% 1.75% PubS-2010 tables Actuarial assumptions used in the June 30, 2019, valuation were based on the results of an actuarial experience study for the 5-year period ended June 30, 2016. 72 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 The long-term expected rate of return on PSPRS pension plan investments was determined to be 7.3% using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Private credit U.S. equity Non-U.S. equity Private equity Real estate GTS Real assets Fixed income Risk parity Short term investments Target Allocation 16% 16% 14% 12% 10% 12% 9% 5% 4% 2% 100% Long-Term Expected Geometric Real Rate of Return 5.36% 4.75% 5.00% 8.40% 4.50% 4.01% 6.75% 3.00% 4.01% 0.25% Pension Discount Rates – At June 30, 2019, the discount rate used to measure total pension liability was 7.3%, which was a decrease of 0.1% from the discount rate used as of June 30, 2018. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 73 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Changes in the Agent Plans Net Pension Liability Police Total Pension Liability Balances at June 30, 2019 Adjustment to beginning of year Changes for the year: Service cost Interest on the total pension liability Differences between expected results and actual experience in the measurement of the total pension liability $ 137,473,434 - Increase/ (Decrease) Plan Fiduciary Net Position $ 4,173,615 10,325,605 Changs of assumptions Contributions - employer Contributions - employee Net investment income Benefit payments Administrative expense Net changes Balances at June 30, 2020 $ 1,313,900 3,858,110 (4,223,688) 15,447,542 152,920,976 Fire Total Pension Liability Balances at June 30, 2019 Adjustment to beginning of year Changes for the year: Service cost Interest on the total pension liability Differences between expected results and actual experience in the measurement of the total pension liability $ 92,469,095 - $ 74 (1,850,677) 1,934,990 (2,462,421) 8,336,656 100,805,751 $ - $ 7,682,173 1,487,218 5,637,557 (4,223,688) (98,934) 10,443,741 103,632,748 $ 75,671,432 (24,536) $ $ 1,313,900 3,858,110 (7,682,173) (1,487,218) (5,637,557) 98,934 5,003,801 49,288,228 Net Pension Liability $ - 3,866,247 1,241,407 4,444,022 (2,462,421) (78,196) 6,986,523 82,657,955 44,284,427 40,585 4,173,615 10,325,605 Increase/ (Decrease) Plan Fiduciary Net Position 3,690,094 7,024,670 Changs of assumptions Contributions - employer Contributions - employee Net investment income Benefit payments Administrative expense Net changes Balances at June 30, 2020 93,189,007 (40,585) Net Pension Liability 16,797,663 24,536 3,690,094 7,024,670 $ (1,850,677) 1,934,990 (3,866,247) (1,241,407) (4,444,022) 78,196 1,350,133 18,147,796 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following presents Gilbert’s net pension liability calculated using the discount rate of 7.3%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.3%) or 1 percentage point higher (8.3%) than the current rate: 1% Decrease (6.3%) Police net pension liability Fire net pension liability $ 73,056,760 34,913,864 Current Discount Rate (7.3%) $ 49,228,228 18,147,796 1% Increase (8.3%) $ 30,223,438 4,625,132 Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued PSPRS financial report. The report is available on the PSPRS website at www.psprs.com. Pension Expense – For the year ended June 30, 2020, Gilbert recognized $14,224,599 as pension expense for Police and $9,136,310 as pension expense for Fire. Pension Deferred Outflows/Inflows of Resources – At June 30, 2020, Gilbert reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Police Differences between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Gilbert contributions subsequent to the measurement date Total $ $ 2,899,533 7,544,048 594,213 20,376,341 31,414,135 Deferred Inflows of Resources $ $ Deferred Outflows of Resources Fire Differences between expected and actual experience Changes in assumptions or other inputs Net difference between projected and actual earnings on pension plan investments Gilbert contributions subsequent to the measurement date Total 75 $ $ 3,506,696 4,442,890 718,462 6,652,405 15,320,453 Deferred Inflows of Resources $ $ 4,310,023 4,310,023 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 The $20,376,341 for Police and the $6,652,405 for Fire reported as deferred outflows of resources related to PSPRS pension resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 2021 2022 2023 2024 2025 Thereafter $ Police 3,938,773 2,033,157 2,128,329 1,301,596 853,797 782,142 $ Fire 1,182,960 443,785 989,531 966,110 530,952 244,686 Volunteer Firemen’s Relief and Pension Fund The Volunteer Firemen’s Relief and Pension Fund covers retired volunteer firemen and survivors and was established solely upon the provision for such pension and relief funds in the Arizona Revised Statutes. The statutes grant discretionary powers to Boards of Trustees of such plans related to payment/nonpayment of benefits to qualified retired or disabled volunteer firemen out of the assets of the fund. These discretionary powers do not extend, however, to the volunteer firemen’s right to their own contributions to the fund. Gilbert has no actuarial liability for pension benefits as individual retirement benefits are not defined in the plan. Reserves for pensions, therefore, have not been established as the amounts are not vested and payment of benefits (if any) is at the discretion of the Board of Trustees of the plan. Gilbert no longer operates a Volunteer Fire Department. Accordingly, there were no contributions required or made to this plan nor refunds paid for fiscal year 2020. Administrative costs are financed through investment earnings. There were no remaining pensioners in the system as of June 30, 2020. The remaining funds of $86,756 were sent to PSPRS to pay down our unfunded fire pension liability. Note 11 – Postemployment Healthcare Benefits Under authority of Town Council, Gilbert provides postretirement insurance benefits, for certain retirees and their dependents in accordance with the Town of Gilbert, Arizona Self-Insured Trust Fund for Health Insurance Benefits. The plan is a single-employer defined benefit OPEB plan administered by Gilbert. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. Generally, retiree contributions are used to pay for postemployment benefits. Benefits Provided – Gilbert provides postemployment medical care, prescription drug, and dental care for retired employees through a single-employer defined benefit medical and dental plan (the Plan). The Plan provides medical and dental benefits for eligible retirees, their spouses and dependents through Gilbert’s group health and dental insurance plans, which cover active and retired members. To be eligible for benefits, the retired employee must retire under one of the state retirement plans for public employees, must have a minimum of ten years of service with Gilbert, and be covered under Gilbert’s medical plan during their active status. Plan benefits and coverage levels are reviewed annually by Town staff and the Board of Trustees for recommendation to and approval from Town Council. The Board of Trustees makes corresponding premium recommendations to the Town Council based on revenues needed to cover the projected cost to operate the plan which are subject to approval by the Town Council. As of June 30, 2020, there are 59 retirees that are currently receiving medical and/or dental benefits. 76 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Contributions – Gilbert requires retirees to pay 125% of the premium of the plan selected by the retiree. Gilbert makes no contributions for retirees other than allowing them to participate through Gilbert’s pooled benefits. Town retirees are eligible to receive benefits through age 65, up until they have access to Medicare. By providing retirees access to Gilbert’s healthcare plans, Gilbert is in effect providing a subsidy to retirees. This implied subsidy exists because on average, retiree healthcare costs are higher than active employee healthcare costs. Gilbert pays for and reports retiree benefits on a pay-as-you-go basis, which is the practice of paying for these benefits as they become due each year. As of June 30, 2020, retirees contributed $464,806, which was in excess of claims paid by $234,253. Gilbert’s regular insurance providers underwrite the retiree policies. Retirees may not convert the benefit into an in-lieu payment to secure coverage under independent plans. The Plan does not issue a separate financial report. Employees Covered by Benefit Terms – The following employees were covered as of the effective date of the OPEB valuation: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total 59 1,182 1,241 Total OPEB Liability – The Plan’s total OPEB liability of $775,237 was measured as of June 30, 2020. Actuarial Assumptions and Other Inputs – Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and includes the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit cost between the employer and plan members to that point. The total OPEB liability in the June 30, 2020 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Measurement date Actuarial valuation date Interest rate Inflation rate Projected salary increases Health care cost trend rate: Medical and prescription drug Retiree contribution increase ASRS subsidy increases Cost of living adjustments June 30, 2020 June 30, 2019 2.45% 3.00% 3.00% 6.00% graded down to an ultimate rate of 5.00% over 5 years Consistent with medical/drug trends None N/A The discount rate was based on the Fidelity General Obligation AA 20-year yield as of the measurement date. Mortality rates for active employees were based on the PubG.H-2010 (general employees) and PubS.H-2010 (public safety) Employee mortality table, Generational with Projection Scale MP-2018 for males/females. Mortality rates for retirees were based on the PubG.H-2010 (current retirees and general employees) PubS.H2010 (public safety) Healthy Annuitant mortality table, Generational with Projection Scale MP-2018 for males/females. 77 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Changes in the Total OPEB Liability Balances at June 30, 2019 Changes for the year: Service cost Interest Differences between expected and actual experience Changes in assumptions/inputs Benefit payments Net changes Balances at June 30, 2020 $ 412,376 $ 69,208 17,841 24,230 74,733 176,849 362,861 775,237 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate – The following presents the total OPEB liability of the Plan, as well as what the Plan’s total OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate: 1% Decrease (1.45%) Total OPEB Liability $ 784,269 Current Discount Rate (2.45%) $ 775,237 1% Increase (3.45%) $ 517,990 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates – The following presents the total OPEB liability of the Plan, as well as what the Plan’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage point lower or 1 percentage point higher than the current rate: Current 1% Decrease Rate 1% Increase Total OPEB Liability $ 487,418 $ 775,237 $ 832,666 OPEB Expense and Deferred Outflows/Inflows of Resource Related to OPEB – For the year ended June 30, 2020, the Plan recognized OPEB expense of $57,975. At June 30, 2020, the Plan reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Changes between expected and actual experience Changes in assumptions or other inputs Total $ $ 78 20,192 853,293 873,485 Deferred Inflows of Resources $ $ 1,887,097 1,887,097 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 The amounts reported as deferred outflows of resources and inflows of resources will be recognized in pension expense as follows: Year Ending June 30 2021 2022 2023 2024 2025 Thereafter $ Amount (205,923) (205,923) (205,923) (205,923) (189,918) - Note 12 – Fund Balance Classifications of the Governmental funds Major Capital Project Funds Fund Balances: Nonspendable: Advances Inventory Prepaid items Restricted for: Capital projects Court/public safety programs Debt service Highways and streets Contract agreements Parks & recreation programs Transportation Special districts Assigned to: Capital replacement Capital projects Highways and streets Management and policy Unassigned: Total fund balances Streets Special Revenue General $ 13,281,380 244,336 2,307,116 17,542,070 37,524,624 12,874,216 60,991 133,900,652 $ 217,735,385 $ 8,619,200 - $ 8,619,200 Streets & Traffic $ 52,800,646 - - $ 12,447,518 - $ 52,800,646 Municipal Facilities Parks $ Major Debt Service Funds 20,251,009 - $ 12,447,518 - (15,665,911) $ 4,585,098 Debt Service Special Assessments $ $ 4,331,472 - $ 4,331,472 $ - Other Gov't $ Total - $ 13,281,380 244,336 2,307,116 202,633 - 2,149,599 44,567 79,243 300,035 402,189 85,499,173 2,149,599 4,534,105 8,619,200 44,567 79,243 300,035 402,189 - (781,821) 17,542,070 37,524,624 12,874,216 60,991 117,452,920 $ 2,193,812 $ 302,915,764 202,633 Note 13 – Capital Contributions During the year ended June 30, 2020, the enterprise funds external capital contributions consisted of the following: Environmental Water Wastewater Services Total Contributions from developers $ 3,094,586 $ 864,931 $ 254,820 $ 4,214,337 Development fees 10,630,039 3,474,547 14,104,586 Total $ 13,724,625 $ 4,339,478 $ 254,820 $ 18,318,923 79 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Note 14 – Interfund Transfers As of June 30, 2020, interfund transfers were as follows: Transfers In Governmental funds: General Streets Special Revenue Streets and Traffic Capital Projects Parks Capital Projects Municipal Facilities Capital Projects Debt Service Other Governmental Funds Total governmental funds $ Enterprise funds: Water Wastewater Total enterprise funds 1,281,500 6,011,201 6,030,247 1,040,321 17,918,025 4,493,100 36,774,394 Transfers Out $ 131,453 667,834 799,287 Total transfers $ 37,573,681 23,608,128 920,410 1,131,598 4,857,447 5,748,221 605,043 36,870,847 702,834 702,834 $ 37,573,681 The interfund transfers generally fall within one of the following categories: 1) subsidy transfers; 2) transfers to cover debt service payments; 3) transfers to fund capital project costs; or 4) transfers to fund capital replacement. There were no significant transfers during fiscal year 2020 that were either non-routine in nature or inconsistent with the activities of the fund making the transfer. Note 15 – Individual Fund Disclosures Individual funds with deficiencies in fund balance/net position at June 30, 2020, were as follows: Governmental funds Grants Other Capital Projects $ 758,400 23,421 The deficiency in the Grants Fund, a non-major governmental fund, is primarily due to unavailable revenue related to various grants. Future grant revenue is expected to eliminate the deficiency. The deficiency in the Other Capital Projects Fund, a non-major governmental fund, is due to the timing of construction related payments and the transfers that fund the payments. The fund’s deficit is expected to be eliminated in the subsequent fiscal year. Internal service funds Equipment Maintenance $ 538,785 The deficiency in the Equipment Maintenance Fund is due to the net pension liability. 80 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Note 16 – Contingent Liabilities Gilbert is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of Gilbert’s legal counsel, the resolution of these matters will not have a material adverse effect on the financial condition of Gilbert. Note 17 – Pledged Revenues Gilbert has pledged future water system development fees revenue and future water and wastewater revenues, net of specified operating expenses, to repay $153,400,000 in utility system revenue and revenue refunding bonds issued since 2016. Proceeds from the utility system revenue bonds provided financing for water and wastewater system improvements, and the proceeds from the revenue refunding bonds were used to advance refund $75,326,000 of outstanding 2007 utility system revenue bonds. The bonds are payable from water and wastewater system development fees and water and wastewater net revenues and are payable through 2036. Annual principal and interest payments on the bonds are expected to require less than 33 percent of revenue described above. The total principal and interest remaining to be paid on the bonds is $163,681,950. Principal and interest paid for the current year was $13,425,313. Total water and wastewater system development fees revenue was $10,074,175 and water and wastewater net revenues were $30,691,920. Gilbert has pledged future excise taxes and state-shared revenues to repay $98,585,000 in public facilities municipal property corporation (MPC) revenue bonds issued since 2011; $20,980,000 in public facilities MPC revenue refunding bonds issued in 2011, $28,080,000 in public facilities MPC revenue refunding bonds issued in 2014, $43,075,000 in public facilities MPC revenue refunding bonds issued in 2017, and $6,450,000 in public facilities MPC revenue bonds issued in 2017. Proceeds from the bonds provided financing of the multipurpose public safety complex, the South Area Service Center facility, a police property facility, a sports complex, various other parks and recreation facilities, a parking facility, and a fire and rescue station. Proceeds from the 2011 refunding bonds were used to advance refund $21,670,000 of outstanding 2001 public facilities MPC revenue bonds. Proceeds from the 2014 refunding bonds were used to advance refund $30,205,000 of outstanding 2006 public facilities MPC revenue bonds. Proceeds from the 2017 refunding bonds were used to advance refund $56,845,000 of outstanding 2009 public facilities MPC revenue bonds. The bonds are payable through 2028. In addition, Gilbert has pledged future excise taxes and state-shared revenues to repay $36,980,000 in revenue obligations issued in 2015. Proceeds from the obligations provided financing to design and construct a four-story building for educational purposes. Annual principal and interest payments on the bonds and obligations are expected to require less than 10 percent of excise taxes and state-shared revenues. The total principal and interest remaining to be paid on the bonds and obligations is $115,595,500. Principal and interest paid for the current year was $17,910,756, and the total excise taxes and state-shared revenues were $193,995,174. Note 18 – Investment in Joint Venture Construction of a joint water reclamation plant with the City of Mesa and the Town of Queen Creek was completed during fiscal year 2007. Mesa is the lead agent and is responsible for the operation and maintenance of the plant. Gilbert, in joint effort with Mesa and Queen Creek, is designing improvements as part of the Phase III Expansion for the Greenfield Water Reclamation Plant (GWRP) located on the northwest corner of Greenfield and Queen Creek Roads. The project includes process improvements and upgrades to increase the plant’s capacity from 16 million gallons per day (mgd) to 30 mgd, as well as maintenance and improvements to the existing infrastructure of the plant. Mesa, Gilbert and Queen Creek participate in ownership of the plant and are charged for operating expenses based on gallons of flow. Gilbert’s investment in joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. 81 Table of Contents TOWN OF GILBERT, ARIZONA NOTES TO THE FINANCIAL STATEMENTS June 30, 2020 Total investment (net of depreciation) as of June 30, 2020, was: Mesa's share Gilbert's share Queen Creek's share Total $ 153,957,191 101,426,329 31,896,961 $ 287,280,481 Construction for the Phase I of a joint water treatment plant with the City of Chandler was completed in fiscal year 2009 and construction for Phase II was completed in fiscal year 2018. Phase I of the plant treats 12 mgd per day each for Gilbert and Chandler. Phase II of the plant added an additional 12 mgd each for Gilbert and Chandler. Gilbert’s investment in joint venture is reflected as a separate line item in the proprietary funds financial statements. Separate financial statements for the joint venture are not prepared. Total investment (net of depreciation) as of June 30, 2020, was: Gilbert's share Chandler's share Total $ 85,347,711 78,605,999 $ 163,953,710 In August 2008, Gilbert entered into an Intergovernmental Agreement with the Cities of Mesa and Apache Junction, Superstition Fire & Medical (F&M), and the Town of Queen Creek (the Parties) to plan, design, construct, operate, maintain and finance the TOPAZ Regional Wireless Cooperative Network (Trunked Open Arizona Network – 700/800 MHz Network procured and built by the City of Mesa). On May 1, 2012 and October 26, 2015, Rio Verde Fire District (FD) and Fort McDowell Yavapai Nation (Fort McDowell), respectively, joined TOPAZ. The City of Mesa acts as the lead agency and is responsible for the planning, budgeting, construction, operation and maintenance of the network, in addition to providing all management personnel and financing arrangements. The Parties participate in ownership of the network and are charged for operating and capital expenses based on a six-month rolling average of airtime. Gilbert’s investment in joint venture is reflected within the governmental activities in the government-wide statement of net position. Separate financial statements are not prepared. Total investment (net of depreciation) as of June 30, 2020, was: Mesa's share Gilbert's share Apache Junction's share Superstition F&M's share Queen Creek's share Fort McDowell's share Rio Verde FD's share Total $ $ 6,706,083 1,736,784 598,308 167,601 111,980 51,273 12,733 9,384,762 Note 19 – Tax Abatements Gilbert has made a commitment as part of our economic development program to reimburse certain public improvement costs through transaction privilege taxes generated out of the respective development area. Additional information regarding this agreement may only be disclosed when a sufficient number of participants can be aggregated together. Gilbert has an insufficient number of participants within the development area to authorize such disclosure, as detailed information on such commitments is prohibited from disclosure under Arizona Revised Statute 42-2002 Disclosure of Confidential Information Prohibited. 82 Table of Contents REQUIRED SUPPLEMENTARY INFORMATION 83 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2020 Schedule of the Proportionate Share of the Net Pension Liability Arizona State Retirement System Fiscal Year Proportion of the net pension liability Proportionate share of the net pension liability Covered payroll (1) Proportionate share of the net pension liability as a percentage of covered payroll Plan fiduciary net position as a percentage of the total pension liability 2020 2019 2018 2017 2016 0.52% $ 75,693,697 52,965,805 0.49% $ 69,364,217 49,511,839 0.49% $ 76,832,504 48,187,902 0.49% $ 78,813,297 45,764,166 0.49% $ 75,695,863 43,765,044 143% 140% 159% 172% 172% 73.24% 73.40% 69.92% 67.06% 68.35% Fiscal Year Proportion of the net pension liability Proportionate share of the net pension liability Covered payroll (1) Proportionate share of the net pension liability as a percentage of covered payroll Plan fiduciary net position as a percentage of the total pension liability 2015 2014 through 2011 0.47% $ 69,412,268 42,295,765 Information not available (2) 164% 69.49% (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2020, the measurement date of the net pension liability is June 30, 2019. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 84 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2020 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System – Police Fiscal Year Total pension liability: Service cost Interest on the total pension liability Changes in benefit terms Differences between expected and actual experience in the measurement of the total pension liability Changes in assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) Plan fiduciary net position: Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position - beginning Adjustment to beginning of year Plan fiduciary net position - ending (b) Net pension liability - ending (a) - (b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll (1) Gilbert's net pension liability as a percentage of covered payroll 2020 2019 2018 2017 2016 2015 4,173,615 10,325,605 - $ 4,056,282 9,457,916 - $ 4,361,408 8,535,995 1,136,619 $ 3,466,239 7,222,969 9,149,421 $ 3,570,214 6,604,564 - $ 3,293,404 5,414,469 605,849 1,313,900 3,858,110 847,849 - 928,575 3,680,906 547,040 4,549,861 713,111 - 2,479,128 5,473,070 (4,223,688) 15,447,542 137,473,434 152,920,976 (5,340,286) 9,021,761 128,451,673 137,473,434 (3,648,774) 14,994,729 113,456,944 128,451,673 (3,515,621) 21,419,909 92,037,035 113,456,944 (2,400,631) 8,487,258 83,549,777 92,037,035 (2,087,138) 15,178,782 68,370,995 83,549,777 7,682,173 1,487,218 5,637,557 $ 7,551,083 1,973,907 6,242,434 $ 12,682,256 2,271,326 8,763,809 $ 4,426,923 2,243,118 365,916 $ 3,280,061 2,107,439 2,037,534 $ 3,103,356 2,088,159 6,306,779 (4,223,688) (98,934) 10,484,326 93,189,007 (40,585) $ 103,632,748 (5,340,286) (95,708) 106,036 10,437,466 82,751,541 $ 93,189,007 (3,648,774) (77,945) 153,768 20,144,440 62,607,101 $ 82,751,541 (3,515,621) (53,053) 113,260 3,580,543 59,026,558 $ 62,607,101 (2,400,631) (50,099) 75,447 5,049,751 53,976,807 $ 59,026,558 (2,087,138) (50,793) 49,298 9,409,661 44,567,146 $ 53,976,807 $ 49,288,228 $ 44,284,427 $ 45,700,132 $ 50,849,843 $ 33,010,477 $ 29,572,970 $ $ 67.77% 67.79% 64.42% 55.18% 64.13% 64.60% $ 20,212,530 $ 18,572,542 $ 18,694,661 $ 19,247,567 $ 19,071,843 $ 18,990,156 243.85% 238.44% 244.46% 264.19% 173.08% 155.73% 2014 through 2011 Information not available (2) (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2020, the measurement date of the net pension liability is June 30, 2019. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 85 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2020 Schedule of Changes in the Net Pension Liability and Related Ratios Public Safety Personnel Retirement System – Fire Fiscal Year Total pension liability: Service cost Interest on the total pension liability Changes in benefit terms Differences between expected and actual experience in the measurement of the total pension liability Changes in assumptions or other inputs Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning Total pension liability - ending (a) 2020 2019 2018 2017 2016 2015 $ 3,690,094 7,024,670 - $ 3,661,929 6,428,184 - $ 3,652,130 5,586,910 434,841 $ 2,728,554 4,550,994 7,610,545 $ 2,785,128 4,138,400 - $ 2,545,607 3,408,433 (131,651) (1,850,677) 1,934,990 (1,694,618) - 3,761,967 444,609 (1,091,858) 3,069,903 (1,235,512) - 2,247,902 1,333,403 (2,462,421) 8,336,656 92,469,095 100,805,751 (1,925,561) 6,469,934 85,999,161 92,469,095 (1,094,738) 12,785,719 73,213,442 85,999,161 (529,722) 16,338,416 56,875,026 73,213,442 (277,805) 5,410,211 51,464,815 56,875,026 (171,217) 9,232,477 42,232,338 51,464,815 Plan fiduciary net position: Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Other changes Net change in plan fiduciary net position Plan fiduciary net position - beginning Adjustment to beginning of year Plan fiduciary net position - ending (b) $ 3,866,247 1,241,407 4,444,022 $ 5,035,275 1,365,916 4,953,004 $ 5,192,069 1,860,471 6,959,055 $ 3,183,837 1,792,809 300,260 $ 1,845,382 1,903,578 1,653,304 $ 1,954,145 1,667,772 5,045,090 (2,462,421) (78,196) 7,011,059 75,671,432 (24,536) $ 82,657,955 (1,925,561) (76,084) 7,224 9,359,774 66,311,658 $ 75,671,432 (1,094,738) (61,976) 636 12,855,517 53,456,141 $ 66,311,658 (529,722) (43,606) 96,335 4,799,913 48,656,228 $ 53,456,141 (277,805) (40,728) (229,513) 4,854,218 43,802,010 $ 48,656,228 (171,217) (40,631) 8,455,159 35,346,851 $ 43,802,010 Net pension liability - ending (a) - (b) $ 18,147,796 $ 16,797,663 $ 19,687,503 $ 19,757,301 $ 8,218,798 $ 7,662,805 Plan fiduciary net position as a percentage of the total pension liability Covered payroll (1) Gilbert's net pension liability as a percentage of covered payroll 82.00% 81.83% 77.11% 73.01% 85.55% 85.11% $ 16,590,770 $ 16,176,584 $ 16,132,031 $ 15,444,728 $ 15,274,115 $ 15,508,151 109.38% 103.84% 122.04% 127.92% 53.81% 49.41% 2014 through 2011 Information not available (2) (1) The covered payroll amount will be as of the measurement date of the net pension liability. For fiscal year 2020, the measurement date of the net pension liability is June 30, 2019. (2) The pension schedules in this required supplementary information are intended to show information for ten years. Additional years’ information will be displayed as it becomes available. 86 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2020 Schedule of Pension Contributions: Arizona State Retirement System Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll 2020 2019 Fiscal Year 2018 2017 2016 $ 6,355,725 $ 5,921,577 $ 5,338,739 $ 5,187,460 $ 5,278,569 $ 6,355,725 - $ 5,921,577 - $ 5,338,739 - $ 5,187,460 - $ 5,278,569 - $ 55,508,515 $ 52,965,805 $ 49,511,839 $ 48,187,902 $ 45,764,166 11.45% 11.18% 10.78% 10.77% 11.53% 2015 2014 Fiscal Year 2013 2012 2011 $ 5,137,457 $ 4,763,978 $ 4,162,425 $ 3,880,631 $ 3,448,898 $ 5,137,457 - $ 4,763,978 - $ 4,162,425 - $ 3,880,631 - $ 3,448,898 - $ 43,765,044 $ 42,295,765 $ 38,356,312 $ 36,582,049 $ 37,474,457 11.74% 11.26% 10.85% 10.61% 9.20% 87 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2020 Schedule of Pension Contributions: Public Safety Retirement System – Police 2019 Fiscal Year 2018 2017 2016 6,702,269 $ 6,410,919 $ 6,170,252 $ 4,501,937 $ 4,021,770 2020 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) $ 20,376,341 $ (13,674,072) 11,245,894 $ (4,834,975) 7,330,436 $ (1,160,184) 12,700,837 $ (8,198,900) $ Covered payroll Contributions as a percentage of covered payroll $ 21,771,020 $ 20,212,530 $ 18,572,542 $ 18,694,661 $ 19,247,567 93.59% 55.64% 39.47% 67.94% 23.12% 2015 4,449,337 (427,567) 2014 Fiscal Year 2013 2012 2011 $ 2,930,117 $ 2,384,390 $ 2,239,987 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) $ 3,414,607 $ 3,231,755 $ 3,414,607 - $ Covered payroll Contributions as a percentage of covered payroll $ 19,071,843 $ 18,990,156 $ 17,477,557 $ 16,492,849 $ 16,550,117 17.90% 17.02% 16.77% 14.46% 13.53% 3,231,755 - $ 2,930,117 - $ 2,384,390 - $ 2,239,987 - Public Safety Retirement System – Fire 2019 Fiscal Year 2018 2017 2016 3,809,026 $ 4,009,743 $ 4,644,867 $ 3,266,367 $ 2,241,688 6,652,405 $ (2,843,379) 7,556,014 $ (3,546,271) $ 5,096,285 (451,418) 5,307,483 $ (2,041,116) $ $ 19,362,567 $ 16,590,770 $ 16,176,854 $ 16,132,031 $ 15,444,728 34.36% 45.54% 31.50% 32.90% 20.00% 2020 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll $ 2015 3,088,477 (846,789) 2014 Fiscal Year 2013 2012 2011 $ 1,793,907 $ 1,479,746 $ 1,422,964 Actuarially determined contribution Contributions in related to the actuarially determined contributions Contribution deficiency (excess) $ 1,982,159 $ 2,037,266 $ 1,982,159 - $ Covered payroll Contributions as a percentage of covered payroll $ 15,274,115 $ 15,508,151 $ 13,954,822 $ 13,335,971 $ 13,220,688 12.98% 13.14% 12.86% 11.10% 10.76% 88 2,037,266 - $ 1,793,907 - $ 1,479,746 - $ 1,422,964 - Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2020 Schedule of Changes in the Town’s Total OPEB Liability and Related Ratios: Town of Gilbert Defined Benefit Plan Fiscal Year 2020 Total OPEB liability: Service cost Interest on the total OPEB liability Differences between expected and actual experience in the measurement of the total OPEB liability Changes in assumptions/inputs Benefit payments, including refunds of employee contributions Net change in total OPEB liability Total OPEB liability - beginning Total OPEB liability - ending (a) Covered payroll (1) $ 69,208 17,841 2019 $ 87,269 54,575 2017 through 2011 2018 $ 84,727 58,026 24,230 74,733 (1,604,373) 159,488 (1,296,953) 1,184,917 176,849 362,861 412,376 775,237 118,124 (1,184,917) 1,597,293 $ 412,376 $ 96,758 127,475 1,469,818 1,597,293 $ 83,544,308 $ 81,110,979 $ 72,406,115 0.9% 0.5% $ Gilbert's total OPEB liability as a percentage of covered payroll Information not available (2) 2.2% (1) The covered payroll amount will be as of the measurement date of the total OPEB liability. For fiscal year 2020, the measurement date of the total OPEB liability is June 30, 2020. (2) The OPEB schedule in this required supplementary information is intended to show information for ten years. Additional years’ information will be displayed as it becomes available. (3) No assets are accumulated in a trust that meets the criteria of a trust as defined in GASB Statement No. 75, Accounting and Reporting for Postemployment Benefits Other than Pensions, to pay for the related benefits of this plan. 89 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2020 Notes to Pension Plan Schedules Note 1 - Actuarially Determined Contribution Rates Arizona State Retirement System (ASRS) The actuarial assumptions used in the June 30, 2019, valuation for ASRS were based on the results of an actuarial experience study for the five-year period ended June 30, 2016. The major changes in assumptions were the discount rate, the actuarial method, the inflation rate, the investment rate, and the mortality table. The ASRS Board adopted the experience study recommended changes which were applied to the June 30, 2017 actuarial valuation. Public Safety Personnel Retirement System (PSPRS) Actuarial determined contribution rates for the Public Safety Personnel Retirement System are calculated as of June 30 two years prior to the end of the fiscal year in which contributions are made. The actuarial methods and assumptions used to establish the contribution requirements are as follows: Actuarial cost method Amortization method Remaining amortization period as of the 2018 actuarial valuation Asset valuation method Actuarial assumptions: Investment rate of return Projected salary increases Wage growth Retirement age Mortality Entry age normal Level percent of pay, closed 18 years 7-year smoothed market value, 80%/120% market corridor PSPRS members with initial membership date before July 1, 2017: In the 2017 actuarial valuation, the investment rate of return was decreased from 7.5% to 7.4%. In the 2016 actuarial valuation, the investment rate of return was decreased from 7.85% to 7.5%. In the 2013 actuarial valuation, the investment rate of return was decreased from 8.0% to 7.85%. PSPRS members with initial membership on or after July 1, 2017: 7.0%. In the 2017 actuarial valuation, projected salary increased were decreased from 4.0%-8.0% to 3.5%-7.5%. In the 2014 actuarial valuation, projected salary increases were decreased from 4.5%-8.5% to 4.0%-8.0%. In the 2013 actuarial valuation, projected salary increases were decreased from 5.0%-9.0% to 4.5%-8.5%. In the 2017 actuarial valuation, wage growth was decreased from 4.0% to 3.5%. In the 2014 actuarial valuation, wage growth was decreased from 4.5% to 4.0%. In the 2013 actuarial valuation, wage growth was decreased from 5.0% to 4.5%. Experience-based table of rates that is specific to the type of eligibility condition. Last updated for the 2012 valuation pursuant to the experience study of the period July 1, 2006 – June 30, 2011. In the 2017 actuarial valuation, changed to RP-2014 tables, with 75% of MP-2016 fully generational projection scales. RP-2000 mortality table (adjusted by 105% for both males and females) 90 Table of Contents TOWN OF GILBERT, ARIZONA REQUIRED SUPPLEMENTARY INFORMATION June 30, 2020 Note 2 – Factors That Affect Trends Arizona courts have ruled that provisions of a 2011 law that changed the mechanism for funding permanent pension benefit increases and increased employee pension contribution rates were unconstitutional or a breach of contract because those provisions apply to individuals who were members as of the law’s effective date. As a result, the PSPRS and EORP changed benefit terms to reflect the prior mechanism for funding permanent benefit increases for those members and revised actuarial assumptions to explicitly value future permanent benefit increases. PSPRS and EORP also reduced those members’ employee contribution rates. These changes are reflected in the plans’ pension liabilities for fiscal year 2015 (measurement date 2014) for members who were retired as of the law’s effective date and fiscal year 2018 (measurement date 2017) for members who retired or will retire after the law’s effective date. These changes also increased the PSPRS required pension contributions beginning in fiscal year 2016 for members who were retired as of the law’s effective date. These changes increased the PSPRS required contributions beginning in fiscal year 2019 for members who retired or will retire after the law’s effective date. 91 92 Table of Contents NONMAJOR FUNDS OTHER GOVERNMENTAL FUNDS Special Revenue Funds Special Revenue Funds are used to account for revenues and expenditures from specific taxes or other earmarked sources. Such funds are usually required by statute or ordinance to finance particular functions or activities. Grants - accounts for miscellaneous grants received from Federal, State and local governments that require segregation of revenues and expenditures. Special Districts - accounts for taxes received from and expenditures of the street light maintenance improvement districts and parkway maintenance improvement districts. Other Special Revenue - accounts for revenues received from various agencies and sources, including seized funds from law enforcement agencies that are required to be used for specific purposes. Capital Projects Funds Capital Projects Funds are established to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Other Capital Projects - accounts for the design and construction of redevelopment infrastructure and related funding. 93 Table of Contents TOWN OF GILBERT, ARIZONA Combining Balance Sheet Nonmajor Governmental Funds June 30, 2020 Special Revenue Special Districts Grants Assets Pooled cash and investments Receivables, net: Taxes Accrued interest Accounts Due from other governments Total assets $ 12,839 $ Other Special Revenue 497,249 $ 1,787,554 1,094,435 1,107,274 10,184 507,433 5,972 4,050 1,967,700 3,765,276 402,816 8,236 834,747 1,245,799 95,725 9,519 105,244 44,126 25,774 135,986 985,946 1,191,832 Deferred inflows of resources Unavailable revenue - grants Total deferred inflow of resources 619,875 619,875 - - Fund balances (deficits) Restricted Unassigned Total fund balances (deficits) (758,400) (758,400) 402,189 402,189 2,573,444 2,573,444 Liabilities Accounts payable Accrued liabilities Due to other funds Unearned revenue Total liabilities Total liabilities, deferred inflows, and fund balances (deficits) 94 $ 1,107,274 $ 507,433 $ 3,765,276 Table of Contents Capital Projects Other Capital Projects Total Nonmajor Governmental Funds $ $ $ 109,749 2,407,391 109,749 10,184 5,972 4,050 3,062,135 5,489,732 133,170 133,170 675,837 43,529 970,733 985,946 2,676,045 - 619,875 619,875 (23,421) (23,421) 2,975,633 (781,821) 2,193,812 109,749 $ 5,489,732 95 Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2020 Special Revenue Special Districts Grants Revenues Property taxes Charges for services Intergovernmental Fines and forfeitures Gifts and donations Investment earnings Miscellaneous Total revenues $ Expenditures Current: General government: Management and policy Finance and management services Court Development services Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Capital outlay Total expenditures 1,365,414 79 1,365,493 $ Other Special Revenue 2,693,920 269 2,694,189 $ 146,022 697,587 344,916 96,994 83,019 1,368,538 1,263,026 65 5,951 5,544 - 46,293 298,877 - 443,496 119,364 3,087 210,423 78,335 2,129,291 1,826,406 1,035,549 29,476 2,891,431 371,827 18,167 2,732 651,550 49,884 14,716 1,454,046 Deficiency of revenues under expenditures (763,798) (197,242) (85,508) Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 168,081 (589,039) (420,958) 11,791 11,791 662,974 (16,004) 646,970 Net change in fund balances Fund balances (deficits) - beginning Fund balances (deficits) - ending (1,184,756) 426,356 (758,400) (185,451) 587,640 402,189 561,462 2,011,982 2,573,444 $ 96 $ $ Table of Contents Capital Projects Total Nonmajor Governmental Funds Other Capital Projects $ $ - $ 2,693,920 146,022 2,063,001 344,916 96,994 83,098 269 5,428,220 10,692 - 1,320,011 65 304,828 5,544 199,922 1,935,078 2,145,692 815,323 137,531 2,029,415 1,248,704 651,550 49,884 2,057,605 8,620,460 (2,145,692) (3,192,240) 3,650,254 3,650,254 4,493,100 (605,043) 3,888,057 1,504,562 (1,527,983) (23,421) 695,817 1,497,995 2,193,812 $ 97 98 Table of Contents BUDGETARY COMPARISON SCHEDULES 99 Table of Contents TOWN OF GILBERT, ARIZONA Streets and Traffic Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Actual Variance with Final Budget Positive (Negative) 4,537,225 3,509,694 2,175,649 10,222,568 $ (11,776,775) (690,306) 2,160,649 (10,306,432) Budgeted Amounts Original Revenues Intergovernmental System development fees Investment earnings Total revenues $ 16,314,000 4,200,000 15,000 20,529,000 Final $ 16,314,000 4,200,000 15,000 20,529,000 $ Expenditures Current: General government: Highways and streets Capital outlay Contingency Total expenditures 688,000 211,947,060 212,635,060 688,000 157,057,142 10,535,352 168,280,494 185,695 37,113,751 37,299,446 502,305 119,943,391 10,535,352 130,981,048 Deficiency of revenues under expenditures (192,106,060) (147,751,494) (27,076,878) 120,674,616 Other financing source (uses) Transfers in Transfers out General obligation bonds issued Total other financing sources (uses) 21,537,320 (2,667,150) 100,000,000 118,870,170 21,537,320 (2,667,150) 100,000,000 118,870,170 6,011,201 (1,131,598) 4,879,603 (15,526,119) 1,535,552 (100,000,000) (113,990,567) (28,881,324) (22,197,275) $ Net change in fund balance Fund balance - beginning Fund balance - ending $ (73,235,890) $ $ 100 74,997,921 52,800,646 6,684,049 Table of Contents TOWN OF GILBERT, ARIZONA Parks Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Budgeted Amounts Original Revenues System development fees Investment earnings Total revenues $ 7,500,000 65,000 7,565,000 Final $ 7,500,000 65,000 7,565,000 Actual $ 10,171,730 537,614 10,709,344 Variance with Final Budget Positive (Negative) $ 2,671,730 472,614 3,144,344 Expenditures Current: General government: Parks and recreation Capital outlay Contingency Total expenditures 1,378,730 52,002,085 53,380,815 877,695 45,442,997 12,783,265 59,103,957 100,343 35,162,044 35,262,387 777,352 10,280,953 12,783,265 23,841,570 Deficiency of revenues under expenditures (45,815,815) (51,538,957) (24,553,043) 26,985,914 Other financing sources (uses) Transfers in Transfers out Proceeds from the sale of capital assets Total other financing sources (uses) 10,339,840 (4,862,690) 19,140,000 24,617,150 11,958,615 (4,867,690) 19,140,000 26,230,925 6,030,247 (4,857,447) 19,129,637 20,302,437 (5,928,368) 10,243 (10,363) (5,928,488) $ (21,198,665) $ (25,308,032) (4,250,606) Net change in fund balance Fund balance - beginning Fund balance - ending $ 101 16,698,124 12,447,518 $ 21,057,426 Table of Contents TOWN OF GILBERT, ARIZONA Municipal Facilities Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Budgeted Amounts Original Revenues System development fees Investment earnings Total revenues $ 5,700,000 5,700,000 Final $ 5,700,000 5,700,000 Actual $ 7,289,603 591,259 7,880,862 Variance with Final Budget Positive (Negative) $ 1,589,603 591,259 2,180,862 Expenditures Current: Public safety: Police Non departmental Debt service: Bond issuance costs Capital outlay Contingency Total expenditures 2,556,290 162,535 2,449,161 157,087 121,587 5,448 2,327,574 88,735,455 91,291,745 649,300 88,749,005 1,899,597 93,909,598 646,945 51,432,304 52,357,923 2,355 37,316,701 1,899,597 41,551,675 Deficiency of revenues under expenditures (85,591,745) (88,209,598) (44,477,061) 43,732,537 Other financing sources (uses) Transfers in Transfers out General obligation bonds issued Premium on general obligation bonds issued Total other financing sources (uses) 22,295,145 (5,894,420) 65,350,000 81,750,725 22,295,145 (5,894,430) 65,350,000 81,750,715 1,040,321 (5,748,221) 61,730,000 4,139,268 61,161,368 (21,254,824) 146,209 (3,620,000) 4,139,268 (20,589,347) Net change in fund balance Fund balance (deficit) - beginning Fund balance - ending $ (3,841,020) $ (6,458,883) 16,684,307 (12,099,209) $ 4,585,098 102 $ 23,143,190 Table of Contents TOWN OF GILBERT, ARIZONA Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Budgeted Amounts Original Revenues Property taxes Investment earnings Total revenues $ 24,150,000 25,000 24,175,000 Final $ 24,150,000 25,000 24,175,000 Actual $ 23,875,747 299,945 24,175,692 Variance with Final Budget Positive (Negative) $ (274,253) 274,945 692 Expenditures Debt service: Principal Interest Bond issuance costs Fiscal and other charges Total expenditures 32,780,000 9,380,310 350,000 41,000 42,551,310 48,670,000 9,640,400 350,000 43,000 58,703,400 48,670,000 9,628,392 205,734 12,356 58,516,482 12,008 144,266 30,644 186,918 Deficiency of revenues under expenditures (18,376,310) (34,528,400) (34,340,790) 187,610 Other financing sources Transfers in Refunding bonds issued Premium on refunding bonds Total other financing sources 17,940,890 17,940,890 17,940,900 17,940,900 17,918,025 15,020,000 1,438,165 34,376,190 (22,875) 15,020,000 1,438,165 16,435,290 (435,420) $ (16,587,500) Net change in fund balance Fund balance - beginning Fund balance - ending $ 35,400 $ 103 4,296,072 4,331,472 $ 16,622,900 Table of Contents TOWN OF GILBERT, ARIZONA Special Assessments Debt Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Budgeted Amounts Original Revenues Special assessments Charges for services Investment earnings Total revenues $ Expenditures Debt service: Principal Interest Fiscal and other charges Total expenditures 5,343,240 5,343,240 $ Actual 5,343,240 5,343,240 $ 744,008 2,222 7,666 753,896 $ (4,599,232) 2,222 7,666 (4,589,344) 5,065,000 248,240 30,000 5,343,240 5,065,000 248,240 30,000 5,343,240 385,000 239,908 750 625,658 4,680,000 8,332 29,250 4,717,582 - - 128,238 128,238 Excess of revenues over expenditures Net change in fund balance Fund balance - beginning Fund balance - ending Final Variance with Final Budget Positive (Negative) $ - 104 $ - $ 128,238 $ 74,395 202,633 $ (9,306,926) Table of Contents TOWN OF GILBERT, ARIZONA Grants Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Budgeted Amounts Original Revenues Intergovernmental Investment earnings Total revenues $ Final 7,228,210 7,228,210 $ 7,228,210 7,228,210 Actual $ 1,365,414 79 1,365,493 Variance with Final Budget Positive (Negative) $ (5,862,796) 79 (5,862,717) Expenditures Current: General government: Management and policy Finance and management services Court Development services Public safety: Police Fire Highways and streets Parks and recreation Capital outlay Contingency Total expenditures 825,080 - 1,657,305 - 1,263,026 65 5,951 5,544 394,279 (65) (5,951) (5,544) 133,820 18,250 5,000,000 5,977,150 277,698 18,250 100,000 74,195 3,849,702 5,977,150 443,496 119,364 3,087 210,423 78,335 2,129,291 (165,798) (101,114) (3,087) (110,423) (4,140) 3,849,702 3,847,859 Excess (deficiency) of revenues over (under) expenditures 1,251,060 1,251,060 (763,798) (2,014,858) Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) (1,251,060) (1,251,060) 167,940 (1,779,060) (1,611,120) 168,081 (589,039) (420,958) 141 1,190,021 1,190,162 (360,060) (1,184,756) 426,356 (758,400) Net change in fund balance Fund balance - beginning Fund balance (deficit) - ending $ - $ $ 105 $ (824,696) Table of Contents TOWN OF GILBERT, ARIZONA Special Districts Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Variance with Budgeted Amounts Original Revenues Property Miscellaneous Total revenues $ 2,701,180 2,701,180 Final $ 2,701,180 2,701,180 Actual $ 2,693,920 269 2,694,189 Final Budget Positive (Negative) $ (7,260) 269 (6,991) Expenditures Current: General government: Highways and streets Parks and recreation Capital outlay Total expenditures 1,905,600 1,180,110 31,500 3,117,210 1,905,600 1,180,110 31,500 3,117,210 1,826,406 1,035,549 29,476 2,891,431 79,194 144,561 2,024 225,779 Deficiency of revenues under expenditures (416,030) (416,030) (197,242) 218,788 12,600 12,600 12,600 12,600 11,791 11,791 (809) (809) (403,430) (185,451) Other financing sources Transfers in Total other financing sources Net change in fund balance $ (403,430) Fund balance - beginning Fund balance - ending $ $ 106 587,640 402,189 $ 217,979 Table of Contents TOWN OF GILBERT, ARIZONA Other Special Revenue Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual - Budgetary Basis For the Year Ended June 30, 2020 Budgeted Amounts Original Revenues Charges for services Intergovernmental Fines and forfeitures Gifts and donations Investment earnings Total revenues $ 391,600 696,000 484,000 107,090 1,678,690 Final $ 391,600 696,000 484,000 107,090 1,678,690 Actual $ 146,022 697,587 344,916 96,994 83,019 1,368,538 Variance with Final Budget Positive (Negative) $ (245,578) 1,587 (139,084) (10,096) 83,019 (310,152) Expenditures Current: General government: Management and policy Court Public safety: Police Fire Parks and recreation Transportation Non departmental Capital outlay Contingency Total expenditures 122,400 571,970 122,400 571,970 46,293 298,877 76,107 273,093 595,220 112,600 61,550 860,000 49,890 2,373,630 666,560 112,600 61,550 860,000 49,890 16,580 4,080 2,465,630 371,827 18,167 2,732 651,550 49,884 14,716 1,454,046 294,733 94,433 58,818 208,450 6 1,864 4,080 1,011,584 Deficiency of revenues under expenditures (694,940) (786,940) (85,508) 701,432 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) 600,000 (15,000) 585,000 1,228,000 (16,110) 1,211,890 662,974 (16,004) 646,970 (565,026) 106 (564,920) Net change in fund balance $ (109,940) Fund balance - beginning Fund balance - ending $ 424,950 561,462 $ 107 2,011,982 2,573,444 $ 136,512 Table of Contents TOWN OF GILBERT, ARIZONA Other Capital Projects Fund Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual For the Year Ended June 30, 2020 Variance with Final Budget Positive (Negative) Budgeted Amounts Original Revenues Total revenues $ Final - $ Actual - $ - $ - Expenditures Current: General government: Management and policy Highways and streets Capital outlay Contingency Total expenditures 471,000 9,343,050 9,814,050 250,000 661,100 4,884,133 4,325,379 10,120,612 10,692 199,922 1,935,078 2,145,692 239,308 461,178 2,949,055 4,325,379 7,974,920 Deficiency of revenues under expenditures (9,814,050) (10,120,612) (2,145,692) 7,974,920 Other financing sources Transfers in Total other financing sources 9,814,050 9,814,050 9,814,050 9,814,050 3,650,254 3,650,254 (6,163,796) (6,163,796) Net change in fund balance $ - Fund balance - beginning Fund balance - ending $ (306,562) 1,504,562 $ 108 (1,527,983) (23,421) $ 1,811,124 Table of Contents INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one department to other departments of the government, on a cost reimbursement basis. Equipment Maintenance - to account for the revenues and expenses from the maintenance of Gilbert's motorized equipment. Employee Benefit Self-Insurance - to account for and finance Gilbert’s uninsured risks of loss for medical and dental claims. 109 Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Net Position Internal Service Funds June 30, 2020 Assets Current assets: Pooled cash and investments Accrued interest Accounts Due from other governments Inventories Total current assets Equipment Maintenance Employee Benefit SelfInsurance $ $ Noncurrent assets: Capital assets: Non-depreciable Depreciable, net Total noncurrent assets Total assets 1,051,880 3,205 658 12,603 795,857 1,864,203 Total 9,800,804 32,761 1,746,102 17,950 11,597,617 $ 10,852,684 35,966 1,746,760 30,553 795,857 13,461,820 4,906 98,790 103,696 1,967,899 11,597,617 4,906 98,790 103,696 13,565,516 Deferred outflows of resources Pensions and other post-employment benefits Total deferred outflows of resources 292,587 292,587 - 292,587 292,587 Liabilities Current liabilities: Accounts payable Accrued liabilities Current portion of accrued compensated absences Claims payable Total current liabilities 351,072 95,403 74,210 520,685 7,000 2,025,000 2,032,000 358,072 95,403 74,210 2,025,000 2,552,685 Noncurrent liabilities: Long-term portion of compensated absences Other post-employment benefits Net pension liability Total noncurrent liabilities Total liabilities 130,358 13,202 1,979,214 2,122,774 2,643,459 2,032,000 130,358 13,202 1,979,214 2,122,774 4,675,459 Deferred inflows of resources Pensions and other post-employment benefits Total deferred inflows of resources 155,812 155,812 - 155,812 155,812 Net position Net investment in capital assets Unrestricted Total net position 103,696 (642,481) (538,785) 9,565,617 9,565,617 103,696 8,923,136 9,026,832 $ 110 $ $ Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Revenues, Expenditures, and Changes in Net Position Internal Service Funds For the Year Ended June 30, 2020 Operating revenues Charges for services Other Total operating revenues Equipment Maintenance Employee Benefit SelfInsurance Total Internal Service Funds $ $ $ Operating expenses General and administrative Personnel services Operation and maintenance Claims incurred Depreciation Total operating expenses 7,159,320 25,168 7,184,488 19,076,747 4,164,053 23,240,800 26,236,067 4,189,221 30,425,288 111,743 1,979,543 4,557,884 17,527 6,666,697 1,488,939 19,966,278 21,455,217 1,600,682 1,979,543 4,557,884 19,966,278 17,527 28,121,914 Operating income 517,791 1,785,583 2,303,374 Nonoperating revenues Investment earnings Total nonoperating revenues 21,418 21,418 360,461 360,461 381,879 381,879 Change in net position 539,209 2,146,044 2,685,253 (1,077,994) 7,419,573 6,341,579 Total net position - beginning $ Total net position - ending 111 (538,785) $ 9,565,617 $ 9,026,832 Table of Contents TOWN OF GILBERT, ARIZONA Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2020 Equipment Maintenance Cash flows from operating activities: Cash receipts from customers Other operating cash receipts Cash receipts from other funds for services Cash payments to suppliers for goods and services Cash payments to employees for services $ Net cash provided by operating activities Cash flows from capital and related financing activities Acquisition and construction of capital assets Net cash used by capital and related financing activities Cash flows from investing activities Interest received on investments Employee Benefit SelfInsurance Total 276,553 17,881 6,965,859 (4,547,556) (2,126,709) $ 4,164,053 18,103,196 (21,125,492) - $ 276,553 4,181,934 25,069,055 (25,673,048) (2,126,709) 586,028 1,141,757 1,727,785 (61,437) - (61,437) (61,437) - (61,437) 20,770 360,750 381,520 Net cash provided by investing activities 20,770 360,750 381,520 Net increase in cash and cash equivalents 545,361 1,502,507 2,047,868 $ 506,519 1,051,880 $ 8,298,297 9,800,804 8,804,816 $ 10,852,684 $ 517,791 $ 1,785,583 $ Cash and cash equivalents at beginning of year Cash and cash equivalents at end of the year Reconciliation of operating income to net cash provided by operating activities: Operating Income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Changes in assets and liabilities: Accounts receivable Due from other governments Inventories Deferred outflows of resources Accounts payable Claims payable Accrued expenses Other post-employment benefits Net pension liability Deferred inflows of resources Net cash provided by operating activities 112 $ 2,303,374 17,527 - 17,527 88,408 (12,603) 49,186 56,797 72,883 4,935 3,025 (65,779) (146,142) 586,028 (955,602) (17,949) 4,725 325,000 1,141,757 (867,194) (30,552) 49,186 56,797 77,608 325,000 4,935 3,025 (65,779) (146,142) 1,727,785 $ $ Table of Contents AGENCY FUNDS Agency Funds are used to account for assets held by the government as an agent for individuals, private organizations, other governments and/or other funds. Flexible Spending - accounts for monies received from employees for medical and dependent care expenses under Internal Revenue Code Section 125. Fire Retirement Health - accounts for monies received from sworn fire employees for providing a monthly stipend for retirees to apply to the cost of their medical and/or dental insurance, medical and dental co-pays, and prescriptions and other benefits. 113 Table of Contents TOWN OF GILBERT, ARIZONA Combining Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2020 Flexible Spending Assets Restricted cash and investments Accounts receivable Prepaid items Beginning Balance Additions Ending Balance Deductions $ 19,934 16,633 $ 612,520 583 487,102 $ 580,567 416 503,735 $ 51,887 167 - Total assets $ 36,567 $ 1,100,205 $ 1,084,718 $ 52,054 Liabilities Medical benefits payable Dependent care benefits payable $ 36,567 $ 5,378 103,574 $ 93,465 $ 5,378 46,676 Total liabilities $ 36,567 $ 108,952 $ 93,465 $ 52,054 Assets Restricted cash and investments $ - $ 62,125 $ 62,125 $ - Total assets $ - $ 62,125 $ 62,125 $ - $ - $ 62,100 62,125 $ 62,100 62,125 $ - $ - $ 124,225 $ 124,225 $ - $ 19,934 16,633 $ 674,645 583 487,102 $ 642,692 416 503,735 $ 51,887 167 - $ 36,567 $ 1,162,330 $ 1,146,843 $ 52,054 $ 36,567 $ 62,100 62,125 5,378 103,574 $ 62,100 62,125 93,465 $ 5,378 46,676 $ 36,567 $ 233,177 $ 217,690 $ 52,054 Fire Retirement Health Fund Liabilities Accounts payable Other deposits Total liabilities Total-All Agency Funds Assets Restricted cash and investments Accounts receivable Prepaid items Total assets Liabilities Accounts payable Other deposits Medical benefits payable Dependent care benefits payable Total liabilities 114 Table of Contents STATISTICAL SECTION This part of Gilbert's Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements and note disclosures says about the Town's overall financial health. Contents Page Financial Trends 117 These schedules contain trend information to help the reader understand how Gilbert's financial performance and well-being have changed over time. Revenue Capacity 123 These schedules contain information to help the reader assess Gilbert's most significant local revenue source, sales tax. Debt Capacity 126 These schedules present information to help the reader assess the affordability of Gilbert's current levels of outstanding debt and Gilbert's ability to issue additional debt in the future. Demographic and Economic Information 131 These schedules offer demographic and economic indicators to help the reader understand the environment within which Gilbert's financial activities take place. Operating Information 133 These schedules contain service and infrastructure data to help the reader understand how the information in Gilbert's financial report relates to the services Gilbert provides and the activities it performs. Other Information 136 Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Report for the relevant year. 115 116 Table of Contents Schedule 1 Town of Gilbert, Arizona Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 2011 Governmental activities Net investment in capital assets Restricted Unrestricted Total governmental activities net position Business-type activities Net investment in capital assets Restricted Unrestricted Total business-type activities net position Primary government Net investment in capital assets Restricted Unrestricted Total primary government net position $ $ $ $ 2012 705,986 38,404 77,284 821,674 $ 294,516 76,504 209,680 580,700 $ $ 1,000,502 114,908 286,964 $ 1,402,374 $ $ 2013 695,983 52,219 83,273 831,475 $ 316,268 71,376 236,097 623,741 $ $ 1,012,251 123,595 319,370 $ 1,455,216 $ $ 2014 687,910 60,525 107,172 855,607 $ 325,357 70,879 263,978 660,214 $ $ 1,013,267 131,404 371,150 $ 1,515,821 $ $ 2015 680,717 80,924 92,357 853,998 $ 351,797 65,577 281,391 698,765 $ $ 1,032,514 146,501 373,748 $ 1,552,763 117 $ $ 2016 688,900 82,546 30,276 801,722 $ 363,333 54,084 290,870 708,287 $ $ 1,052,233 136,630 321,146 $ 1,510,009 $ $ 2017 735,369 83,227 49,960 868,556 $ 411,831 34,054 304,198 750,083 $ $ 1,147,200 117,281 354,158 $ 1,618,639 $ $ 2018 753,973 72,780 60,983 887,736 $ 399,537 42,814 342,616 784,966 $ $ 1,153,510 115,594 403,598 $ 1,672,702 $ $ 2019 790,285 76,701 45,964 912,950 $ 392,632 34,499 389,336 816,467 $ $ 1,182,917 111,200 435,299 $ 1,729,416 2020 792,864 87,450 67,904 948,218 $ 462,857 30,972 379,636 873,465 $ $ 1,255,721 118,422 447,540 $ 1,821,683 $ $ $ $ $ $ 804,917 72,943 132,638 1,010,497 468,440 24,873 408,154 901,467 1,273,357 97,815 540,792 1,911,964 Table of Contents Schedule 2 Town of Gilbert, Arizona Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (1,000's) 2011 Expenses Governmental activities: General government: Management and policy Support services Finance and management services Court Development services Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Interest and fiscal charges on long-term debt Total governmental activities expenses Business-type activities: Water Wastewater Environmental services Total business-type activities expenses Total primary government expenses Program Revenues Governmental activities: Charges for services: Development services Police Fire Highways and streets Parks and recreation Other activities Operating grants and contributions Capital grants and contributions Total governmental activities program revenues $ 3,110 8,503 1,287 5,126 8,201 2012 $ 2,983 8,632 1,216 5,410 8,551 2013 $ 10,461 4,150 5,474 6,850 2014 $ 13,378 4,347 5,975 9,062 2015 $ 19,090 1,814 4,053 7,082 2016 $ 20,049 2,110 4,164 7,611 2017 $ 19,454 2,109 4,300 9,400 2018 $ 19,176 2,000 4,078 10,312 2019 $ 24,948 1,883 3,898 9,449 2020 $ 23,430 2,591 3,947 10,898 38,869 24,473 40,440 19,764 1,010 2,194 17,675 170,652 40,467 24,906 43,438 19,932 1,269 2,910 15,785 175,499 42,759 25,867 44,048 20,858 461 3,114 15,142 179,184 45,931 28,853 45,781 22,493 842 4,104 15,216 195,982 47,541 28,071 46,932 28,429 778 4,423 12,780 200,993 50,115 31,972 48,726 25,647 1,051 5,311 12,911 209,666 63,151 42,513 51,931 25,202 1,132 13,690 10,506 243,389 54,117 34,969 52,545 29,985 1,151 7,976 10,793 227,102 55,328 35,263 54,632 35,840 886 3,915 9,890 235,933 65,972 41,373 61,414 26,844 655 5,076 9,641 251,841 36,863 23,039 14,255 74,157 $ 244,809 37,695 22,662 14,918 75,275 $ 250,773 38,339 22,170 15,588 76,097 $ 255,281 39,927 23,615 16,113 79,655 $ 275,637 41,817 25,620 16,720 84,157 $ 285,150 44,360 26,530 17,719 88,609 $ 298,275 42,329 26,791 16,857 85,978 $ 329,366 44,605 27,244 18,183 90,032 $ 317,134 47,167 27,844 21,689 96,700 $ 332,632 49,373 30,930 22,928 103,231 $ 355,073 $ $ $ $ $ $ $ $ $ $ 3,178 2,891 136 1,739 3,740 853 21,168 28,002 61,707 5,347 5,584 129 1,497 3,595 861 21,045 26,060 64,117 7,240 5,512 185 1,516 3,706 1,017 21,270 36,089 76,535 118 6,783 5,477 254 1,440 3,765 1,066 22,326 19,186 60,297 6,608 4,526 224 1,643 4,146 829 24,171 37,214 79,361 6,826 5,343 197 1,745 4,366 873 38,666 65,535 123,551 6,900 7,484 231 1,951 4,603 844 33,204 41,877 97,094 7,227 3,826 360 1,887 4,700 748 28,381 32,904 80,033 8,318 3,609 386 16 4,355 1,136 30,012 36,203 84,037 6,867 1,827 827 13 4,800 953 53,661 39,675 108,623 Table of Contents Business-type activities: Charges for services: Water Wastewater Environmental services Operating grants and contributions Capital grants and contributions Total business-type activities program revenues Total primary government program revenues $ Net (Expense)/Revenue Governmental activities Business-type activities Total primary government net expense $ (108,945) 19,005 $ (89,940) 35,966 21,678 17,194 18,324 93,162 154,869 General Revenues and Other Changes in Net Position Governmental activities: Taxes: Sales taxes $ 49,249 Property taxes 25,796 1,351 In-Lieu property taxes Franchise taxes 2,401 Unrestricted state-shared revenue 31,068 864 Unrestricted grants and contributions Unrestricted investment earnings 2,137 Gain/(loss) on sale of capital assets Miscellaneous 355 Transfers 537 Total governmental activities 113,758 Business-type activities: 1,012 Investment earnings 164 Gain on sale of capital assets Miscellaneous 2,216 (537) Transfers 2,855 Total business-type activities Total primary government $ 116,613 Change in Net Position Governmental activities Business-type activities Total primary government $ $ 4,813 21,860 26,673 $ 36,692 22,740 17,924 37,222 114,578 178,696 $ 36,455 23,083 16,760 34,153 110,451 186,986 $ 37,867 23,852 17,308 36,252 115,279 175,576 $ 37,501 24,625 18,007 29,017 109,150 188,511 $ $ (111,381) 39,303 $ (72,078) $ (102,649) 34,354 $ (68,295) $ (135,685) 35,624 $ (100,061) $ (121,632) 24,993 $ (96,639) $ $ $ $ $ $ $ $ $ 54,513 21,502 1,331 2,463 33,882 1,349 1,910 178 4,744 (690) 121,182 1,244 39 1,765 690 3,738 124,920 9,801 43,041 52,842 $ $ $ 61,813 19,184 1,377 3,083 38,355 1,193 722 932 121 126,780 1,061 1,179 (121) 2,119 128,899 24,131 36,473 60,604 $ $ $ 119 66,757 18,315 1,287 2,616 41,323 904 1,508 29 1,226 110 134,076 1,742 30 1,266 (110) 2,928 137,004 (1,609) 38,552 36,943 $ $ $ 71,773 19,423 1,201 2,737 44,263 2,595 1,224 106 847 184 144,353 1,457 172 1,310 (184) 2,755 147,108 22,722 27,748 50,469 $ $ $ $ 39,457 25,116 18,141 1,051 43,655 127,421 250,972 $ (86,115) 38,812 (47,303) $ (146,295) 34,107 $ (112,188) $ (147,069) 29,589 $ (117,479) $ (151,895) 26,879 $ (125,017) $ (143,219) 17,257 $ (125,961) 77,070 19,424 1,187 2,989 45,028 3,204 2,651 136 1,162 98 152,949 $ $ $ $ 2,666 158 259 (98) 2,984 155,933 66,834 41,796 108,630 $ $ $ 40,696 26,032 18,270 953 34,134 120,084 217,178 82,797 20,761 1,159 2,814 52,861 2,400 859 154 1,224 446 165,475 1,009 92 121 (446) 776 166,251 19,180 34,883 54,063 $ $ $ $ 42,868 26,517 18,437 1,184 30,615 119,622 199,655 89,497 21,549 1,124 2,911 52,193 2,444 1,549 1,333 1,352 (64) 173,888 1,894 39 172 64 2,169 176,057 26,820 31,758 58,579 $ $ $ $ 45,508 28,686 20,633 1,720 27,032 123,578 207,616 98,648 25,220 1,024 2,954 53,777 3,036 10,153 1,466 1,153 (242) 197,189 11,494 183 366 242 12,284 209,473 45,293 39,163 84,456 $ $ $ $ 48,782 29,772 21,918 1,698 18,319 120,489 229,111 107,534 26,570 1,015 2,744 57,802 2,762 10,467 (3,973) 674 (96) 205,498 9,820 148 680 96 10,744 216,242 62,279 28,002 90,281 Table of Contents Schedule 3 Town of Gilbert, Arizona Program Revenues by Function Last Ten Fiscal Years (1,000's) 2011 2013 2014 2015 2016 2017 2018 2019 2020 3,989 3,163 39,324 9,422 215 51 7,689 6,892 25,634 15,314 624 135 7,669 4,079 41,280 14,475 662 51 7,207 3,697 28,218 12,461 712 51 8,975 3,766 44,497 13,012 639 51 10,645 4,170 69,791 29,861 635 50 11,551 3,877 54,059 18,190 626 50 7,829 4,203 44,943 12,158 630 50 8,544 4,687 43,133 15,035 648 1,136 18,366 13,783 50,476 15,561 643 562 Subtotal governmental activities 61,707 64,118 76,535 60,297 79,361 123,551 97,094 80,033 84,037 108,623 Business-type activities: Water Wastewater Environmental services 46,133 29,835 17,194 56,904 39,735 17,938 55,662 38,029 16,760 57,750 40,220 17,308 55,590 35,552 18,008 68,102 41,178 18,141 61,546 37,232 21,307 64,056 36,232 19,334 65,489 36,344 21,746 64,204 34,111 22,173 Subtotal business-type activities 93,162 114,577 110,451 115,278 109,150 127,421 120,084 119,622 123,578 120,489 $ 154,869 $ 178,695 $ 186,986 $ 175,575 $ 188,511 $ 250,972 $ 217,178 $ 199,655 $ 207,616 $ 229,111 Total primary government a 2012 Function/Program Governmental activities: General government: Management and policy $ Support services a Finance and management services Court Development services Public Safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental 15 649 9 597 4,273 $ 16 242 11 670 6,891 $ 36 251 792 7,240 $ 59 262 823 6,807 The support services function was eliminated in fiscal year 2013. 120 $ 962 27 824 6,608 $ 690 24 859 6,826 $ 991 20 831 6,900 $ 2,235 27 731 7,227 $ 1,830 7 700 8,318 $ 1,503 12 573 7,145 Table of Contents Schedule 4 Town of Gilbert, Arizona Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) General fund Nonspendable Assigned Unassigned Total general fund $ $ 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 22,317 $ 10,729 33,521 66,568 $ 23,213 $ 10,797 44,250 78,260 $ 23,527 $ 10,092 59,555 93,174 $ 25,380 $ 24,470 $ 19,866 $ 18,995 $ 17,877 $ 23,061 $ 15,833 12,081 17,046 13,681 32,766 41,371 41,631 68,002 61,764 67,057 85,498 82,885 72,453 89,787 133,901 99,225 $ 108,573 $ 119,046 $ 134,646 $ 131,701 $ 154,479 $ 217,735 All other governmental funds $ 4 $ 2 $ 1 $ 83 $ 2 $ 4 $ - $ Nonspendable 2 $ 1 $ 108,051 100,572 89,654 92,337 96,837 87,005 Restricted 139,725 134,441 110,470 101,628 28,261 26,159 36,258 18,764 22,462 38,337 Assigned 34,387 15,971 (20,781) (23,199) (23,609) (25,466) (23,981) (19,897) Unassigned (19,353) (18,311) (17,424) (16,448) Total all other governmental funds $ 115,535 $ 103,534 $ 102,304 $ 85,718 $ 95,320 $ 105,449 $ 154,760 $ 132,102 $ 93,047 $ 85,180 121 Table of Contents Schedule 5 Town of Gilbert, Arizona Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (1,000's) Revenues Taxes: Sales Property Franchise Special assessments Licenses and permits Intergovernmental Charges for services Other entities' participation System development fees Gifts and donations Fines and forfeitures Investment earnings Miscellaneous Total revenues $ 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 49,315 $ 28,732 2,401 559 2,365 55,362 7,288 2,313 8,736 176 4,351 2,106 355 164,059 54,503 $ 24,045 2,463 879 3,995 61,468 8,164 1,300 17,957 186 4,442 1,889 4,947 186,238 61,890 $ 21,548 2,374 1,299 5,434 72,904 9,573 2,252 17,836 119 4,710 706 933 201,578 66,772 $ 20,681 2,700 2,090 4,748 68,046 10,027 1,977 13,435 155 4,469 1,494 1,255 197,849 71,794 $ 21,953 2,737 1,184 4,791 76,284 10,440 382 18,836 192 4,476 1,210 953 215,232 77,108 $ 22,000 3,389 2,233 4,787 77,007 11,147 1,666 22,944 187 4,618 2,639 14,797 244,523 82,980 $ 23,707 2,814 696 4,785 87,364 11,161 2,252 18,101 120 4,336 836 5,683 244,835 89,516 $ 24,468 2,911 958 4,645 84,923 12,151 1,585 17,617 195 4,065 1,523 1,796 246,352 98,671 $ 25,220 2,954 818 5,735 86,480 12,816 4,380 21,966 183 3,305 9,890 1,153 273,572 107,552 26,570 2,744 744 4,689 117,277 13,154 9,799 20,971 280 3,084 10,085 674 317,624 3,845 9,239 1,416 4,403 7,160 3,676 9,160 1,722 4,617 7,514 12,584 4,235 4,753 5,999 15,336 4,413 5,089 6,078 20,485 1,943 3,493 6,069 20,997 2,134 3,608 6,239 22,001 2,270 3,657 7,049 21,858 2,338 3,600 7,200 22,942 2,396 3,752 7,701 26,854 2,681 3,491 8,194 Expenditures Current: General government: Management and policy Support services Finance and management services Court Development services Public safety: Police Fire Highways and streets Parks and recreation Transportation Non departmental Debt service: Principal Interest Payment to refunded bond escrow agent Bond issuance costs Fiscal and other charges Capital outlay Total expenditures 35,007 20,200 9,736 12,591 1,010 2,194 36,384 21,552 10,815 12,688 1,269 2,910 38,817 22,543 10,637 13,895 461 3,114 41,947 24,993 11,969 15,614 841 4,104 43,084 25,631 12,478 21,836 774 4,423 44,402 28,295 12,831 18,591 1,046 5,311 54,397 32,048 14,680 19,660 1,135 13,690 53,174 35,698 14,545 24,351 1,151 7,976 58,327 35,828 15,769 30,482 888 3,915 69,450 35,883 23,184 20,588 652 5,076 29,215 18,451 20 41,935 196,422 23,055 15,992 402 9 34,500 186,265 24,705 15,411 13 30,849 188,016 25,630 14,252 13 38,804 209,083 23,750 13,108 209 307 58,849 236,439 30,105 13,773 37 36,573 223,942 34,935 11,583 779 9 34,111 252,004 33,965 11,758 12,096 408 14 50,895 281,026 34,190 11,242 35 71,644 299,112 49,055 9,868 853 13 127,093 382,934 Excess (deficiency) of revenues over (under) expenditures (32,363) (27) 13,562 (11,234) (21,207) 20,581 (7,169) (34,674) (25,539) (65,310) Other financing sources (uses) Transfers in Transfers out Proceeds from sale of capital assets Revenue obligations issued Premium on revenue obligations Bonds issued Premium on bonds Payment to refunded bond escrow agent Total other financing sources and uses 25,272 (24,586) 686 25,195 (25,885) 37,925 4,111 (41,627) (281) 25,774 (25,653) 121 45,891 (45,781) 590 700 23,401 (23,216) 36,980 2,706 28,080 4,417 (32,211) 40,157 21,406 (21,385) 21 23,334 (22,881) 121,670 14,139 (64,182) 72,080 29,999 (30,063) 1,226 49,525 7,546 (49,162) 9,070 63,086 (63,324) 1,691 1,453 36,774 (36,871) 38,470 76,750 5,577 120,701 (308) $ 13,683 $ (10,534) $ 18,950 $ 20,601 $ 64,911 $ (25,604) $ (24,086) $ 55,390 25.7% 25.5% 23.4% 20.8% 23.4% 21.3% 25.1% 20.0% 23.0% Net change in fund balances $ Debt service as a percentage of noncapital expenditures (31,677) $ 30.9% 122 Table of Contents Schedule 6A Town of Gilbert, Arizona Sales Tax Collections by Category Fiscal Years 2011 - 2016 a 2011 Construction Manufacturing Communications & Utilities Wholesale Retail Restaurant & Bar Real Estate, Rental & Leasing Accommodation b Services Other b Transportation & Warehousing Finance & Insurance Public Administration Arts & Entertainment Total $ 2012 2013 2014 2015 2016 4,389,279 $ 5,718,727 $ 7,867,067 $ 8,837,079 $ 7,663,801 $ 7,326,040 706,514 727,755 763,152 939,861 882,509 1,042,710 5,562,364 5,774,403 5,931,935 6,120,225 6,342,578 6,327,257 854,466 965,523 1,100,749 1,207,006 1,320,977 1,486,450 25,540,515 28,390,526 30,784,509 33,078,748 37,463,617 40,406,219 3,820,368 4,072,187 4,402,299 4,867,638 5,526,275 6,177,869 5,874,288 6,078,364 7,944,973 7,952,365 8,286,878 9,290,919 252,974 299,270 377,228 487,680 533,870 569,390 1,069,661 1,211,864 1,369,608 1,676,438 2,018,647 2,223,706 652,043 520,302 487,279 505,146 629,740 784,957 21,161 25,830 25,667 22,721 30,529 37,823 89,990 112,496 154,772 398,169 438,257 557,582 4,586 2,271 4,311 3,020 18,977 481,592 600,794 594,043 674,274 652,973 858,177 $ 49,315,215 $ 54,502,627 $ 61,805,552 $ 66,771,661 $ 71,793,671 $ 77,108,076 Gilbert's local sales tax rate 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Source: Arizona Department of Revenue a Effective July 1, 2016, the Arizona Department of Revenue changed the way taxpayers report city tax on their tax returns and simultaneously changed the manner in which they summarize the tax data in their reports to the cities. As a result, we no longer receive the tax data in the same categories that we had in the past. See Schedule B for fiscal years 2017 forward. Note: State and local laws prohibit the disclosure of individual taxpayer information. 123 Table of Contents Schedule 6B Town of Gilbert, Arizona Sales Tax Collections by Category Fiscal Years 2017 - 2020 a 2017 Accommodation Amusement Communications & Utilities Construction Contracting Maintenance, Repair, Replacement & Alterationb Personal Property Rental Publications, Advertising & Job Printing Rental of Commercial Property/Non-Residential Residential Rental Restaurant & Bar Retail Tax License Feesc Other Total $ $ 2018 599,950 793,681 5,625,248 9,611,076 89,165 1,392,591 174,054 4,116,417 3,367,073 6,974,438 49,491,813 14,632 730,191 82,980,329 598,668 844,634 5,763,531 10,833,291 1,535,298 165,942 4,435,844 3,652,056 7,638,319 53,366,713 13,246 668,812 $ 89,516,354 1.5% 1.5% Gilbert's local sales tax rate $ 2019 $ $ 728,224 922,856 5,707,201 13,167,940 1,706,431 166,146 4,790,946 4,238,867 8,549,495 57,710,844 9,646 972,655 98,671,251 1.5% 2020 $ $ 820,336 709,163 5,784,555 12,919,743 1,755,690 140,170 4,944,404 4,569,549 8,442,741 66,602,568 863,073 107,551,991 1.5% Source: Arizona Department of Revenue a Effective July 1, 2016, the Arizona Department of Revenue changed the way taxpayers report city tax on their tax returns and simultaneously changed the manner in which they summarize the tax data in their reports to the cities. As a result, Gilbert no longer receives the tax data in the same categories that were reported in the past. See Schedule 6A for Fiscal Years 2011 - 2016 data. b Maintenance, Repair, Replacement & Alteration has been combined with Construction Contracting due to disclosure laws concerning confidentiality. c Effective July 1, 2019, Tax License Fees were combined with Other due to disclosure laws concerning confidentiality Note: State and local laws prohibit the disclosure of individual taxpayer information. 124 Table of Contents Schedule 7 Town of Gilbert, Arizona Direct and Overlapping Sales Tax Rates Last Ten Fiscal Years 2011 2012 2013a 2014 2015 2016 2017 2018 2019 2020 Town Direct Rates: Hotel/Transient Lodging All Others 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.50% 1.50% 4.30% 1.50% 4.30% 1.50% 4.30% 1.50% County Rates: Hotel/Transient Lodging All Others 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% 1.77% 0.70% State Rates: Hotel/Transient Lodging All Others 6.50% 6.60% 6.50% 6.60% 6.50% 6.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% 5.50% 5.60% Source: Gilbert Finance & Management Services Department a The temporary state sales tax increase passed by voters in 2010 expired on May 31, 2013. 5.50% and for all others to 5.60% on June 1, 2013. Note: Gilbert sales tax rate may be changed with the approval of Council. 125 The state sales tax for hotel/transient lodging decreased to Table of Contents Schedule 8 Town of Gilbert, Arizona Ratios of Outstanding Debt by Type Last Ten Fiscal Years Fiscal Year General Obligation Bonds Special Assessment Bonds Governmental Activities Municipal Street and Property Highway User Corporation Revenue Revenue Bonds Bonds Business-type Activities General Obligation Bonds Revenue Obligations - $ - 2011 $ 178,722,625 $ 2012 159,547,197 2013 147,640,933 11,457,958 $ 11,056,456 10,469,338 25,502,688 $ 20,836,060 18,130,241 161,045,000 $ 152,243,537 142,828,198 2014 2015 2016 135,775,830 123,420,395 105,296,311 9,445,797 8,306,402 6,504,185 16,864,197 13,754,807 10,538,003 133,835,907 126,607,711 118,310,093 39,685,688 39,685,688 247,585 - - - 2017 2018 2019 2020 157,102,290 140,551,095 122,209,904 168,454,903 6,126,440 5,464,645 4,912,850 4,526,056 7,174,209 3,664,605 - 109,229,636 95,342,840 81,835,435 64,161,400 39,637,764 38,887,844 38,122,923 37,328,003 - - - Notes: See Schedule 13 for personal income and population data. Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements. Includes unamortized bond discounts/premiums. 126 5,540,340 $ 3,877,755 2,115,170 Special Assessment Bonds - $ - Water and Wastewater Revenue Bonds Municipal Property Corporation Revenue Bonds 16,527,813 $ 143,200,304 $ 15,164,911 118,853,753 13,757,813 111,081,450 Total Primary Government Percentage of Personal Income Per Capita 541,996,729 481,579,670 446,023,143 8.56 % $ 7.72 6.31 2,587 2,277 2,066 104,083,879 98,190,924 135,410,861 400,253,194 409,965,927 415,745,141 6.09 5.89 5.52 1,807 1,804 1,789 134,594,390 170,517,212 160,502,481 151,742,751 453,864,729 454,428,241 407,583,593 426,213,113 5.30 5.13 4.64 4.61 1,833 1,835 1,571 1,643 Table of Contents Schedule 9 Town of Gilbert, Arizona Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years General Bonded Debt Outstanding b Fiscal Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $ 184,262,965 163,424,952 149,756,103 136,023,415 123,420,395 105,296,311 157,102,290 140,551,095 122,209,904 168,454,904 $ Less Amount Available in Debt Service Fund Net General Bonded Debt Outstanding 6,366,097 $ 177,896,868 9,335,818 9,599,968 8,942,949 10,165,593 6,952,183 2,186,272 6,020,480 1,870,513 1,846,926 154,089,134 140,156,135 127,080,466 113,254,802 98,344,128 154,916,018 134,530,615 120,339,391 166,607,978 $ Secondary Assessed Property Value a Limited Property Value a 2,297,228,317 N/A 7.74 % 1,861,193,961 1,675,360,422 1,594,806,737 1,829,471,839 N/A N/A N/A N/A N/A N/A N/A N/A N/A 1,845,325,449 1,979,359,269 2,105,762,268 2,256,162,227 2,428,289,285 8.28 8.37 7.97 6.19 5.33 7.83 6.39 5.33 6.86 $ Percentage of Applicable Property Value Per Capita $ 849 729 649 574 498 423 626 543 464 642 a Maricopa County Assessor's Office b Includes unamortized bond discounts/premiums Notes: In accordance with Proposition 117, The Arizona Property Tax Assessed Valuation Amendment , property taxes are calculated based on the limited property value beginning with tax year 2015. See Schedule 13 for population data. General obligation bonds principal and interest payments are paid for with secondary property taxes. 127 Table of Contents Schedule 10 Town of Gilbert, Arizona Direct and Overlapping Governmental Activities Debt As of June 30, 2020 Governmental Unit Debt repaid with property taxes Maricopa County b Maricopa County Community College District c $ Debt Outstanding Estimated Percentage Applicable a None 5.65% Estimated Share of Direct and Overlapping Debt None $ 250,065,000 5.65% Maricopa County Special Health District 429,125,000 5.65% 24,245,563 14,128,673 Gilbert Unified School District No. 41 98,370,000 69.57% 68,436,009 Higley Elementary School District No. 60 95,550,000 88.72% 84,771,960 Chandler Unified School District No. 80 349,628,888 13.12% 45,871,310 Mesa Unified School District No. 4 East Valley Institute of Technology District No. 401 d 231,730,000 None 37.16% 12.68% 86,110,868 None Subtotal, overlapping debt Town of Gilbert direct debt 323,564,382 e 274,470,363 Total direct and overlapping debt 100.00% 274,470,363 $ 598,034,745 Source: The various jurisdictions a Proportion applicable to Town of Gilbert, Arizona is computed on the ratio of limited property valuation for fiscal year 2019/20. Excludes various other non-property tax supported debt such as Public Finance Corporation lease revenue bonds, Stadium District revenue bonds, Stadium District loans, Housing Authority loans and capital leases. c Excludes non-property tax supported debt such as revenue bonds. b d Based on the East Valley Institute of Technology's secondary assessed valuation and does not include amount of secondary assessed valuation in Pinal County. e Includes: General Obligation bonds, Special Assessments bonds, Revenue obligations, Revenue bonds and unamortized bond premiums. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of Gilbert. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Gilbert. This process recognizes that, when considering Gilbert's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. 128 Table of Contents Schedule 11 Town of Gilbert, Arizona Legal Debt Margin Information Last Ten Fiscal Years 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20% Limitation Debt limit equal to 20% of net full cash assessed valuation $ Total net debt applicable to 20% limit Premium adjustment Legal 20% debt margin (available borrowing capacity) $ Total net debt applicable to the 20% limit as a percentage of 20% debt limit 437,048,132 $ 369,996,694 $ 333,373,568 $ 317,092,733 $ 346,856,631 $ 369,065,090 $ 395,871,854 $ 524,748,518 $ 566,219,031 $ 622,820,366 175,915,000 163,335,000 149,675,000 135,310,000 122,715,000 105,250,000 143,945,000 128,090,000 110,445,000 151,825,000 - - - - - - 9,675,637 9,516,726 8,090,801 11,071,074 459,924,292 261,133,132 $ 206,661,694 $ 183,698,568 $ 181,782,733 $ 224,141,631 $ 263,815,090 $ 242,251,217 $ 387,141,792 $ 447,683,230 $ 40.25% 44.14% 44.90% 42.67% 35.38% 28.52% 38.81% 26.22% 20.93% 131,114,440 $ 110,999,008 $ 100,012,071 $ 95,127,820 $ 104,056,989 $ 110,719,527 $ 118,761,556 $ 157,424,555 $ 169,865,709 $ 26.15% 6% Limitation Debt limit equal to 6% of net full cash assessed valuation $ Total net debt applicable to 6% limit Legal 6% debt margin (available borrowing capacity) Total net debt applicable to the 6% limit as a percentage of 6% debt limit - $ 131,114,440 $ 0.00% - 110,999,008 $ 0.00% - 100,012,071 $ 0.00% - 95,127,820 $ 0.00% - 104,056,989 $ 0.00% - 110,719,527 $ 0.00% - 118,761,556 $ 0.00% - 157,424,555 $ - - 169,865,709 $ 0.00% 186,846,110 0.00% 186,846,110 0.00% Legal Debt Margin Calculation for Fiscal Year 2020 Net full cash assessed valuation as of June 30, 2020 $ 3,114,101,831 20% Limitation Debt limit equal to 20% of net full cash assessed valuation 622,820,366 Debt applicable to limit: General obligation bonds Premium adjustment 151,825,000 11,071,074 Legal 20% debt margin (available borrowing capacity) $ 459,924,292 6% Limitation Note: The Constitution of the State of Arizona establishes two levels of bonded indebtedness limits based upon the type of improvement constructed with the debt. The twenty percent bond type is restricted to water, wastewater, electric, parks and open space improvements, streets, public safety, and fire and emergency facilities. The six percent bond type is all other general purpose improvements. In 2017, HB 2452: bonding; amortized premium; segregated fund passed, requiring the net premium associated with a general obligation bond to be amortized for all debt limitation purposes on a pro-rata basis each year. 129 Debt limit equal to 6% of net full cash assessed valuation 186,846,110 Debt applicable to limit: General obligation bonds Legal 6% debt margin (available borrowing capacity) $ 186,846,110 Table of Contents Schedule 12 Town of Gilbert, Arizona Pledged-Revenue Coverage Last Ten Fiscal Years Public Facilities Municipal Property Corp. Revenue Bonds Special Assessment Bonds & Subordiante Lien Pledged Revenue Obligations Special Fiscal Assessment Year Collections 2011 $ Excise Taxes & State-Shared Debt Service Principal Interest Coverage Revenue $ c Coverage 559,284 $ 90,000 $ 587,245 0.83 89,202,148 $ 9,030,000 $ 7,705,188 5.33 878,981 400,000 574,655 0.90 97,342,250 9,335,000 7,149,316 5.91 2013 1,298,984 585,000 553,258 1.14 109,637,647 9,695,000 6,873,353 6.62 2014 2,089,887 1,020,000 507,965 1.37 117,627,904 10,080,000 6,458,288 7.11 2015 1,184,368 1,135,000 470,225 0.74 125,743,087 7,515,000 6,030,998 9.28 2016 2,232,678 1,795,000 394,755 1.02 133,104,631 8,000,000 7,457,791 8.61 2017 695,541 375,000 321,073 1.00 146,007,063 9,660,000 6,877,081 8.83 2018 952,679 660,000 294,670 1.00 159,912,939 14,355,000 4,721,073 8.38 2019 818,092 550,000 264,095 1.00 170,885,312 12,745,000 5,213,731 9.52 2020 744,007 385,000 239,908 1.19 193,995,174 13,300,000 4,610,856 10.83 Less: Net Water Resources Municipal Property Corp. Revenue Bonds Debt Service Fiscal Operating Operating Available Year Revenues a Expenses a Revenue 59,780,559 $ 33,231,244 $ 26,549,315 $ 1,355,000 $ 763,863 12.53 2012 61,087,190 34,505,518 26,581,672 1,385,000 723,213 2013 60,627,063 36,124,117 24,502,946 1,430,000 2014 62,873,206 37,514,942 25,358,264 1,500,000 2015 63,338,422 40,316,645 23,021,777 2016 64,659,329 42,119,371 2017 66,788,603 2018 Interest Coverage Water Available System Wastewater System Revenue b Dev't Fee Dev't Fee Debt Service Interest Coverage 6,485,383 $ 6,878,502 $ 3,400,000 $ 7,198,049 3.57 12.61 24,473,459 13,590,998 15,154,154 3,550,000 6,096,337 5.52 681,663 11.60 22,391,283 12,466,409 - 3,700,000 5,542,403 3.77 610,163 12.02 23,248,101 10,567,046 - 3,875,000 5,198,059 3.73 - - N/A 23,021,777 10,461,708 - 4,075,000 4,894,864 3.73 22,539,958 - - N/A 22,539,958 11,873,824 - 4,275,000 4,683,019 3.84 41,921,216 24,867,387 - - N/A 24,867,387 9,914,166 - 4,830,000 4,984,570 3.54 69,487,792 45,014,122 24,473,670 - - N/A 24,473,670 9,944,975 5,308,292 8,480,000 4,970,948 2.95 2019 74,465,811 44,686,700 29,779,111 - - N/A 29,779,111 9,434,032 5,189,779 7,225,000 6,207,163 3.31 2020 78,919,231 48,227,311 30,691,920 - - N/A 30,691,920 6,679,195 3,394,980 7,560,000 5,865,313 3.04 $ Principal Net 24,430,452 $ 2011 b Interest 2012 Water and Wastewater Revenue Bonds c a Debt Service Principal $ Combined operating revenues and expenses for the Water and Wastewater Funds, as applicable. Combined operating revenues and expenses for the Water and Wastewater Funds less debt service payments for the Water and Wastewater Revenue Bonds. These bonds were paid off in fiscal year 2014. Note: Details regarding Gilbert's outstanding debt can be found in the notes to the financial statements. 130 Principal Table of Contents Schedule 13 Town of Gilbert, Arizona Demographic and Economic Statistics Last Ten Fiscal Years Personal Income b Fiscal Year Population 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 209,468 211,491 215,938 221,506 227,217 232,399 247,600 247,600 259,386 n/a Per Capita Income c (in thousands) (estimate) a $ 6,329,000 6,240,000 7,064,000 6,568,000 6,962,000 7,534,000 8,558,000 8,858,000 8,775,000 n/a $ (estimate) Median Age c School Enrollment d Unemployment Rate e 29,731 28,413 31,035 28,184 30,639 32,418 34,565 35,777 33,831 35,672 32.7 31.5 33.1 37.5 32.7 33.2 33.1 34.4 35.2 34.8 38,660 38,696 38,573 38,573 37,240 34,079 35,449 34,552 33,393 34,188 5.1% 5.4% 5.7% 5.2% 4.3% 4.2% 3.7% 3.5% 3.8% 8.0% Sources: a 2009 through 2016 Census.gov; 2017 and 2018 Office of Management & Budget; 2019 Maricopa Association of Governments; 2020 not available before publication b Estimated based on population and per capita income c 2009 through 2015: American Community Survey; 2016 through 2020: Census.gov d Arizona Department of Education; beginning in 2011, school enrollment was obtained from the Gilbert Public Schools website. e laborstats.az.gov through 2019; laborstats.az.gov changed to azcommerce.com in 2020 131 Table of Contents Schedule 14 Town of Gilbert, Arizona Top Ten Principal Employers Current Fiscal Year Compared to Nine Years Ago Employer Fiscal Year 2020 Percentage of Total Town Employees Rank Employment Gilbert Unified School District Banner Health Town of Gilbert Go Daddy Software, Inc. Fry's Food and Drug Higley Unified School District Wal-Mart Stores, Inc. Deloitte Dignity Health Chandler Unified School District Target Stores, Inc. Mercy Gilbert Medical Center Costco Orbital Sciences Corporation 2,807 1,847 1,671 1,365 1,157 1,120 1,027 1,000 857 793 --------- Total 13,644 1 2 3 4 5 6 7 8 9 10 Source: Maricopa Association of Governments 132 Fiscal Year 2011 Percentage of Total Town Employees Rank Employment 4.05% 2.67% 2.41% 1.97% 1.67% 1.62% 1.48% 1.44% 1.24% 1.14% --------- 4,173 1,213 1,402 600 817 --694 ------455 762 418 400 19.70% 10,934 1 3 2 7 4 6 8 5 9 10 6.57% 1.91% 2.21% 0.94% 1.29% --1.09% ------0.72% 1.20% 0.66% 0.63% 17.22% Table of Contents Schedule 15 Town of Gilbert, Arizona Full-time Equivalent Employees by Function Last Ten Fiscal Years 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Function Governmental Funds General government: Management and policy 21.2 22.2 88.5 95.8 120.0 128.6 131.6 132.6 136.1 Support services 62.0 62.0 - - - - - - - 142.5 - Finance and management services 18.25 19.3 29.0 19.0 19.0 21.0 21.0 25.0 25.5 26.5 Court 52.9 51.9 49.9 51.9 32.9 32.9 32.9 33.9 33.9 33.9 Development services 72.5 72.5 69.6 68.8 73.3 66.7 68.7 83.7 84.5 93.3 Police 346.0 346.0 346.0 349.0 354.0 358.0 369.0 385.5 409.5 429.5 Fire Public safety: 197.0 197.0 197.0 201.0 201.0 203.0 210.0 217.0 216.0 223.0 Highways and streets 49.3 49.3 51.0 58.0 58.0 51.7 51.7 53.7 55.7 55.7 Parks and recreation 101.7 102.0 106.8 121.8 118.7 125.3 126.2 128.3 128.5 169.1 Water 118.1 120.0 118.2 118.0 116.5 125.0 130.0 131.0 133.5 135.7 Wastewater 40.7 41.7 41.7 44.7 45.4 42.5 42.5 43.5 45.5 48.5 Environmental services 79.0 78.5 79.0 83.5 84.0 94.3 96.3 97.3 100.3 101.8 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 1,184.8 1,188.4 1,202.7 1,237.5 1,248.8 1,275.0 1,305.9 1,357.5 1,395.0 1,485.6 Enterprise Funds Internal Service Funds Equipment maintenance Total Source: Gilbert Office of Management & Budget 133 Table of Contents Schedule 16 Town of Gilbert, Arizona Operating Indicators by Function Last Ten Fiscal Years 2011 Function General government: Management and policy % of population satisfied with value received from tax dollar Number of recruitments Employee turnover Legal and court Case filings % of cases charged after review Development services Building permits issued Value of permits issued (in millions) Public Safety: Police Number of arrests Crimes per 1,000 population Fire Number of emergency calls Response time average (enroute to on-scene) b Total dispatch time (dispatch to onscene) b Highways and streets Average pavement condition index 90% 86 6.6% 2012 a N/A 79 6.8% 2013 2014 77% 110 8.0% 75% 155 7.5% 2015 a N/A 148 8.3% 2016 74% 175 9.7% 2017 a N/A 149 9.3% 2018 2019 2020 71% 156 10.3% 79% 199 10.4% N/A 200 9.6% 25,888 64% 26,271 72% 31,794 72% 28,896 72% 29,499 71% 32,091 70% 29,501 74% 26,147 74% 24,244 70% 20,813 74% 2,219 $ 238.7 3,474 $ 474.9 3,418 $ 534.4 3,254 $ 472.5 3,364 $ 496.0 3,584 $ 553.8 4,157 $ 532.2 4,607 $ 531.6 4,441 $ 746.3 4,278 $ 607.8 8,330 19.3 9,003 18.3 8,734 16.5 8,474 16.6 8,900 15.5 8,702 15.3 8,250 15.5 8,360 15.2 8,061 13.2 7,889 13.0 13,946 3 min 37 sec 14,133 3 min 49 sec 15,509 3 min 47 sec 16,185 3 min 51 sec 17,777 3 min 57 sec 18,923 3 min 55 sec 19,422 5 min 9 sec 20,506 3 min 32 sec 4 min 48 sec 20,903 3 min 25 sec 4 min 44 sec 20,680 3 min 25 sec 4 min 46 sec N/A N/A N/A N/A N/A N/A N/A 91 91 80 75 75 72 74 72 73 72 16,637 N/A 47,493 16,880 N/A 48,725 16,277 N/A 52,714 16,440 N/A 52,616 N/A 11,747 62,815 N/A 19,835 69,423 N/A 18,000 71,651 N/A 16,000 98,286 N/A 16,670 113,245 N/A 14,993 133,868 Parks and recreation Facility reservation requests c Facility reservations c Participants in recreation programs d Transportation Average daily ridership 845 560 635 685 687 669 679 784 668 522 Water Daily average water production (mg) Average # of meters read per month Number of utility locates 42 71,910 10,576 43 73,469 15,190 43 71,952 23,277 43 72,712 20,235 43 73,199 20,100 43 82,871 21,197 46 83,945 26,850 47 84,243 27,380 47 84,147 23,157 50 83,650 22,357 Wastewater Daily average wastewater influent (mg) Annual effluent produced/reused (bg) 12.67 4,840 12.20 4,457 12.79 4,667 12.82 4,646 13.21 4,822 14.03 4,815 14.91 4,931 15.41 5,115 16.20 5,784 16.54 5,307 111,943 19,242 109,472 18,653 115,536 18,695 113,965 19,851 112,778 19,418 114,144 19,894 110,520 22,567 113,745 24,058 129,737 21,120 130,713 22,325 Environmental services Solid waste tonnage Recycle tonnage Source: Various Town departments Survey completed every other year Beginning in 2017, the Fire Department began reporting total dispatch time instead of average time enroute to on-scene Indicator no longer being tracked; beginning in 2015, tracking actual facility reservations Only includes adult sports, youth ball programs, adaptive recreation, and town-sponsored special events 134 Table of Contents Schedule 17 Town of Gilbert, Arizona Capital Asset Statistics by Function Last Ten Fiscal Years 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 166 164 164 180 185 217 224 251 249 263 9 10 10 10 10 10 10 10 11 11 Highways and streets Street centerline miles (estimate) a Traffic control signals 923 173 979 175 989 177 905 180 1,032 185 1,055 185 908 194 920 201 926 206 943 210 Parks and recreation Total acres of park land, trails, open space, municipal areas and support facilities, operated and maintained 690 652 653 605 605 605 645 645 645 725 1,189 1,216 1,219 1,261 1,304 1,660 1,322 1,335 1,366 1,100 868 970 976 1,006 1,019 1,038 887 896 923 774 61 61 61 66 67 57 56 71 63 62 Function Public safety: Police Number of police cars Fire Fire stations Water Miles of water main c, d Wastewater Miles of wastewater main c, d Environmental services Garbage trucks b Source: Various Town departments a The street centerline miles were previously estimated using different methods, such as end of warranty and beginning of Town ownership. Beginning in 2015, the estimate is based on acceptance letter date. b Prior to fiscal year 2016, wheel loaders were included in the statistic. c Beginning in 2017, estimates were updated to exclude miles not owned by Gilbert. d Beginning in 2020, estimates were updated to exclude preliminary miles (Initial Acceptance Letter is not completed) Note: No capital asset statistics are available for the general government or transportation functions. 135 Table of Contents Schedule 18 Town of Gilbert, Arizona Property Value, Construction and Bank Deposits Last Ten Fiscal Years Fiscal Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Residential Construction a Number of Permits Value 1,130 2,331 2,015 1,613 1,668 1,764 1,754 1,604 1,535 1,194 $ 182,201,825 408,322,951 385,182,885 315,632,904 350,707,421 402,071,499 336,676,752 312,805,353 467,961,355 435,133,652 Commercial Construction a Number of Permits Value 180 182 224 284 268 278 264 199 155 208 $ 25,831,880 31,550,416 102,447,825 99,959,286 81,934,987 71,594,349 119,477,874 129,703,582 164,601,167 85,390,836 Other Construction a Number of Permits Value 909 961 1,179 1,357 1,428 1,542 2,139 2,804 2,751 2,876 $ 30,710,863 $ 35,017,191 46,773,456 56,890,360 63,344,257 80,164,565 76,023,423 89,093,501 113,774,277 87,276,267 Secondary Assessed Property Value b 2,297,228,317 1,861,193,961 1,675,360,422 1,594,806,737 1,829,471,839 N/A $ N/A N/A N/A N/A Limited Property Value b Maricopa County Bank Deposits c N/A $ 60,408,631,000 N/A 61,673,751,000 N/A 65,485,982,000 N/A 70,253,713,000 N/A 76,889,448,000 1,845,325,449 84,014,143,000 1,979,359,269 92,567,543,000 2,105,762,268 98,288,781,000 2,256,162,227 107,879,366,000 2,428,289,285 132,017,181,000 Sources: Development Services Department b Maricopa County Assessor's Office c Federal Deposit Insurance Corporation a Note: In accordance with Proposition 117, The Arizona Property Tax Assessed Valuation Amendment, property taxes are calculated based on the limited property value beginning with tax year 2015. 136 Table of Contents Schedule 19 Town of Gilbert, Arizona System Development Fees Fiscal Year 2020 System Development Fee Type Traffic Signal Beginning System Development Other Balance Fees Collected Revenue $ 11,230,734 $ 2,039,880 $ Ending Expenditures 486,434 $ Balance (1,079,719) $ 12,677,328 Police 3,123,507 1,659,197 93,699 (2,898,913) 1,977,490 Fire (9,780,123) 2,867,984 - (1,152,959) (8,065,099) a General Government (5,827,940) 2,762,422 - (2,150,762) (5,216,281) a Parks and Recreation 17,910,703 10,171,730 19,667,251 (33,799,717) 13,949,967 1,469,814 52,749 6,702,330 6,679,195 64,495 Water Resources (27,698,016) 3,950,844 Wastewater 24,269,645 3,474,547 Roads - Water Totals $ 19,930,840 $ 35,075,612 - 920,274 $ 21,284,902 $ 1,522,563 (13,031,084) 414,937 (1,587,643) (25,334,816) b (4,206,870) 24,457,596 (59,907,668) $ 16,383,686 Equivalent Residential Unit Wastewater system development fee - Greenfield $ 2,586 Wastewater system development fee - Neely 157 $ Source: Gilbert Finance & Management Services Department a The negative ending balances for the fire and general government system development fees are funded by the general fund. The general fund had a cash balance of $174,749,410 at June 30, 2020. b The negative ending balance for the water resources system developmnet fees are funded by the water fund. The water fund had a cash balance of $125,502,768 at June 30, 2020. 137 Table of Contents Schedule 20 Town of Gilbert, Arizona Property Tax Levies and Collections Last Ten Fiscal Years Initial Year Collections Net Current Tax Levy Collections Percent of Levy County Resolutions 25,920,268 21,162,280 19,109,800 18,237,946 19,358,530 19,415,083 20,782,041 21,595,546 22,129,563 96.79% 97.60% 99.00% 98.83% 99.05% 99.09% 99.10% 99.06% 99.20% (277,785) (217,974) (143,945) (89,343) (128,555) (80,173) (131,108) (72,239) (44,819) 26,090,435 21,284,092 19,154,349 18,269,413 19,414,602 19,462,966 20,832,305 21,614,138 22,308,601 (44,819) (28,727) 23,988,712 23,702,115 98.81% (28,727) Fiscal Year Tax Levy County Resolutions 2011 2012 2013 2014 2015 2016 2017 2018 26,198,053 21,380,254 19,253,745 18,327,289 19,487,085 19,495,256 20,913,149 21,667,785 (107,618) (96,162) (99,396) (57,876) (72,483) (32,290) (80,844) (53,647) 2019 22,353,420 2020 24,017,440 25,253,466 20,772,494 18,962,640 18,056,441 19,230,809 19,286,314 20,645,301 21,411,196 Source: Maricopa County Treasurer's Office 138 Cumulative Collections Net Delinquent Total Tax Levy Collections Collections Percent of Levy 22,308,601 659,061 385,308 144,108 179,463 126,706 127,665 135,492 183,114 172,186 22,301,749 99.97% 99.98% 99.98% 99.99% 99.99% 99.99% 99.99% 99.99% 99.97% 23,988,712 - 23,702,115 98.81% 25,912,527 21,157,802 19,106,748 18,235,904 19,357,515 19,413,979 20,780,793 21,594,310 Table of Contents Schedule 21 Town of Gilbert, Arizona Principal Property Taxpayers Fiscal Year 2020 Principal Taxpayer Type of Business Westcor Santan Village LLC Southwest Gas Corporation (T&D) American Furniture Warehouse Co. Vestar CTC Phase 1 LLC Power & Ray LLC Santan MP LP Target Corporation Liv Northgate LLC Earnhardt Arizona Properties LLC Breit Olympus Mph Redstone LLC Breit Olympus MF Vistara LLC AZ Flats at San Tan Apartments LLC 155 Rivulon Boulevard LLC Lowe's Hardware Inc. 275 Rivulon Boulevard LLC Fulton Homes Corporation San Privada Apartments LLC Gilbert Road Owner LLC Branch Brook Gardens Santan Apts LLLP Arizona Public Service Company Smiths Food & Drug Centers Inc. Breit Olympus MF Heritage LLC LIT Industrial Limited Partnership B H GTS LLC Shopping Center Utility Retail Real Estate Development / Holdings Utility Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Utility Retail Real Estate Development / Holdings Real Estate Development / Holdings Real Estate Development / Holdings Limited Property Valuation As % of Town's Total Limited Property Valuation $ 21,285,591 8,043,551 5,551,716 5,387,820 5,255,418 5,029,592 4,882,237 4,658,080 4,571,158 4,546,865 4,395,184 4,361,629 4,116,120 3,934,197 3,761,311 3,716,774 3,683,407 3,681,257 3,622,687 3,588,852 3,585,384 3,570,603 3,553,200 3,524,916 3,371,274 0.94% 0.36% 0.25% 0.24% 0.23% 0.22% 0.22% 0.21% 0.20% 0.20% 0.19% 0.19% 0.18% 0.17% 0.17% 0.16% 0.16% 0.16% 0.16% 0.16% 0.16% 0.16% 0.16% 0.16% 0.15% $ 125,678,823 5.56% Source: Maricopa County. Top taxpayers based on Net Assessed Limited Property Value of Real and Secured Personal Property for tax year 2020. Note: Information included for current fiscal year only as this is what is required for continuing disclosure requirements for Gilbert's bond issues. 139 140 50 E. Civic Center Drive, Gilbert, AZ 85296 (480) 503-6871 | gilbertaz.gov